I am without a position in LOR/GSTRF at this time(Covered everything this morning), but thought I'd pass these along.
New reports out:
1) Bank of America--*We are lowering our rating of Globalstar to Market Perform from Buy.
*Although early, we see no evidence that Globalstar is outselling Iridium at
the roughly 10-to-1 level necessary to meet subscriber projections.
*Current usage and pricing assumption seem highly aggressive, at 160 minutes
of use per month and $0.47 per minute wholesale, respectively.
*Fixed site market likely to be difficult to penetrate against geostationary
competition with significantly lower cost structures.
*Mobile competition from lower-cost competitors including Iridium and ACeS.
Restructuring of Iridium and ICO may transform Globalstar from being the low
cost provider to being the high cost provider.
*Repeated management guidance reductions may hurt trading levels.
*We believe the low discount rates used to justify Globalstar's valuation
are inconsistent with the just over 30% yield to maturity of its bonds.
*Long-term, we believe satellite telephony will become a significant market
especially as handset pricing and size come down and feel that Globalstar
has the potential to be a significant player in this market.
2) ING--We are lowering our projections on mobile subscribers and fixed site
revenues. As a result, we are
adjusting our YE00 and YE01 price targets to $29 and $35 respectively based
on our DCF valuation.
Our previous price targets were $38 and $45 respectively.
ú Handset production is currently around 25,000 per month according to the
manufacturers. As a
result, we are lowering our YE2000 mobile subscriber estimate to 320,000
from our previous 400,000
level. We are also lowering our 2001 mobile net additions from our previous
1.2 million net additions
to 700,000.
ú We expect demand to track gateway service introductions. Many of which
occur between 3Q00 and
1Q01. We point out a potential red flag, however, that several service
providers that we spoke with
indicated that they have enough phones to meet current demand.
ú We are revising our revenues on Fixed Site terminals downward to levels
that are comparable to
those already in service by competitors. As a result, our fixed site revenue
estimates are reduced from
$171.0 million in 2001 to $101.4 million and from $333.0 million in 2002 to
$222.1 million.
ú Although we are lowering our revenue projections, future EBITDA estimates
remain attractive.
At Globalstar's current enterprise value of around $11.0 billion, GSTRF is
trading at a multiple of
roughly 9x times our 2003 EBITDA forecast.
ú We continue to believe that significant demand exists for telephones in
emerging markets and
Globalstar could be an excellent solution in many parts of the world. Our
concerns are mostly near-term
and are centered on outside vendors.
ú We are experiencing positive results being a Globalstar subscriber,
receiving excellent service
quality. We believe that Globalstar should succeed in the long run as the
company has significant
pricing flexibility and capacity scalability
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