Shares of the satellite company Globalstar shot up more than 30% on Friday, November 1, following the company’s announcement of an expanded agreement with iPhone maker Apple. Barron’s reports that the new deal could double Globalstar’s revenue.
Details
On Friday, Globalstar stock added 31.4% on the New York Stock Exchange to $1.38 per share before extending the gains in after-hours trading. Still, it is off almost 29% since the beginning of the year and 2% over the last 12 months.
Earlier in the day, Globalstar disclosed in a filing with the U.S. SEC that it had updated its agreement with Apple to deliver expanded services over a new mobile satellite services network, including a new satellite constellation and expanded ground infrastructure. The new contract is valued at $1.5 billion, including an infrastructure prepayment of up to $1.1 billion, provided on a quarterly basis by Apple over the construction period, and a $400 million investment by Apple to acquire a 20% equity stake in the telecommunications company. Globalstar plans to use some of the proceeds to retire its outstanding senior notes due in 2029.
As reported by Barron’s, Globalstar expects its total annual revenue to more than double in the year following the launch of the expanded satellite services. In the first half of 2024, the company’s top line was up about 3% at $116.9 million, translating into a net loss of $22.9 million, which represented a near-sevenfold increase.
Context
Apple relies on Globalstar to enable emergency calls in areas without cellular reception. This feature first became available on the iPhone 14 and iPhone 14 Pro in 2022. At the time, Apple made a $450 million investment in Globalstar’s infrastructure. Under the new agreement, Globalstar will allocate up to 85% of its network capacity to Apple. Besides Apple, it serves companies in the construction and transportation sectors, as well as governments and emergency services. Currently, Globalstar operates 31 satellites, while it has ordered as many as 26 satellites to replenish and upgrade its low-Earth orbit (LEO) constellation, as noted by CNBC.
According to Israeli satellite-based broadband communications company Gilat Satellite, about 50,000 satellites are expected to be launched into LEO within a decade. The main players in this segment include Telesat, Iris2, OneWeb, Elon Musk’s Starlink, and Jeff Bezos’s Amazon. Following the announcement of the expanded Apple-Globalstar agreement, Craig-Hallum raised its target price for Globalstar stock from $4 to $5 per share (250% upside versus the last closing price) while maintaining a “buy” rating. It argues that the latest news demonstrates Apple’s long-term commitment to Globalstar.
