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Sirius, ViaSat Seen Leading Rally in Satellite-Related Stocks This Year
By Amy Hellickson
Sirius, ViaSat Seen Leading Satellite Stock Rally in 2000
Washington, Jan. 15 (Bloomberg) -- Sirius Satellite Radio
Inc. and ViaSat Inc. will lead a rally in satellite-related
stocks in 2000 as the demand for Internet, voice and data
services rises, investors and analysts said.
Satellite stocks soared last year because of the increasing
popularity of wireless transmission systems. Shares of EchoStar
Communications Corp., for example, rose more than eightfold as
the satellite television service boosted the number of
subscribers by more than 60 percent.
As EchoStar and others prove the viability of satellite TV,
some investors and analysts are betting the technology will
become a popular alternative for providing such services as radio
programming and Internet access. They cite broadcaster Sirius and
equipment-maker ViaSat as likely beneficiaries.
``A lot of investors finally are seeing the potential of
satellite,' said Banc of America Securities analyst Armand
Musey.
The C.E. Unterberg, Towbin Satellite Index, which includes
24 stocks, more than doubled in 1999 while the Standard & Poor's
500 Index gained 20 percent. In 1998, the Unterberg index rose
7.1 percent.
The rally occurred even though satellite-telephone companies
Iridium LLC and ICO Global Communications Ltd. filed for
bankruptcy protection in August. Shares of Iridium World
Communications Ltd., the publicly traded arm of Iridium LLC, fell
95 percent last year. ICO's shares fell 79 percent.
More Capacity
Carlsbad, California-based ViaSat makes signal-processing
equipment that allows satellites to transmit and receive
information on one channel, letting communications providers
squeeze more out of their satellites. Its shares rose almost
fivefold last year.
If Internet-by-satellite takes off, ViaSat could be the big
winner, some analysts say.
``They'll increase capacity, which enables you to have more
customers on a system at lower prices,' said ING Barings analyst
Rob Kaimowitz.
ViaSat had sales of $71.5 million in the fiscal year ended
March 31, up 11 percent. ViaSat's net income rose 19 percent to
$6.3 million from $5.3 million a year earlier. Sales may more
than triple in the next few years, said Kaimowitz, who has a
``strong buy' rating on the company.
The stock has tripled since the end of November and closed
Friday at 52 1/4.
Kaimowitz said he recently raised his ``near-term' forecast
for the stock to $60 from $30.
Digital Radio
New York-based Sirius plans to broadcast music directly to
U.S. motorists using satellites, a move that may revolutionize
radio in much the same way that cable changed television.
Analyst said the quality of the digital signal and diverse
programming will generate growth at Sirius, which changed its
name from CD Radio Inc. in November.
Sirius ``is the only satellite stock we see reaching orbit
in 2000, as additional auto distribution agreements work to
assure investors of a very bright future,' William Kidd, an
analyst at C.E. Unterberg, Towbin, wrote in a report.
Kidd expects Sirius stock price to rise to $58 within the
next 12 months. The company's shares rose 30 percent last year
and recently traded at about 42.
Last month, Blackstone Group Inc., the New York investment
firm headed by Peter Peterson, paid $200 million for a 10 percent
stake in the company.
Shares of Globalstar Telecommunications Ltd., the only
publicly traded satellite-telephone company that hasn't filed for
bankruptcy protection, more than doubled last year. The company
is 45 percent owned by Loral Space & Communications Ltd.
Investors will be watching Globalstar in 2000 to see whether
the company can attract customers, said Doug Eby, president of
Torray Cos., which owns about 9 million, or 3.7 percent, of
Loral's shares outstanding.
`Financial Takeoff'
Globalstar's ``financial takeoff will be in 2001, but 2000
will be a viability story as people see whether the business
works,' he said.
Analysts said they are waiting to see Globalstar's earnings
report next month, which will include new subscriber numbers,
before making recommendations on the shares.
Some investors have their doubts about Globalstar. They
wonder if the financial debacles of Iridium and ICO and increased
competition from cellular-telephone providers will undercut the
market for satellite phones. Another problem: The satellite
phones now available are heavier and bulkier than the new
generation of cell phones, and the service is more expensive.
``We're worried about if there's a market' for satellite
phones, said Keith Ferguson, an analyst at Boston's Loomis,
Sayles & Co. Loomis owned 145,119 shares of Loral at the end of
August. |
