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What Makes Viasat (VSAT) a Promising Investment Option

Zacks Equity Research
·4 min read
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Earnings estimates for the current fiscal for Viasat Inc. VSAT have surged 82.1% in the past year, making it one of the best performers in the Zacks Wireless Equipment. With healthy fundamentals, this Zacks Rank #2 (Buy) stock appears to be a solid investment option for investors at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Growth Drivers

Viasat enjoys a leading position in the satellite and wireless communications market. With the rapid proliferation of the smartphone market and usage of mobile broadband, the user demand for coverage speed and quality has increased, which in turn is fueling the demand for network tuning and optimization to maintain high data traffic. The company attracts millions of U.S. consumers and enterprises with its high-quality broadband service. Encouragingly, Viasat’s blue-chip customer base, which comprises the U.S. Department of Defense, civil agencies, allied foreign governments, satellite network integrators as well as large communications service providers and enterprises, adds to its strength. Currently, the company’s Government Systems segment is acting as a major profit churner. Going forward, Viasat is eyeing opportunities to extend broadband satellite mobility to rotary wing aircraft, as it is a large addressable market that can emerge as a key profit churner.

In addition, the company is ramping up investments in the development of its revolutionary ViaSat-3 broadband communications platform, which will boast nearly 10 times the bandwidth capacity of ViaSat-2. The ViaSat-3 payload program has begun its transition to the construction phase. These satellites will be capable of covering one-third of the world, including the Americas. The second ViaSat-3, launching in 2020, will cover the Europe, the Middle East and Africa region. The ViaSat-3 platform will help form a global broadband network with sufficient network capacity to allow better consumer choices with an affordable, high-quality, high-speed Internet and video streaming service. In a nutshell, Viasat has garnered enough economics of scale and scope to serve vast emerging markets of South America, Africa, the Middle East and Western Asia. Hence, momentous market traction of ViaSat-1 and ViaSat-2 satellites, coupled with strategically planned ViaSat 3 satellites, is expected to provide the company a solid competitive edge over peers, thereby bolstering growth in the long run.

Viasat’s Satellite Services business is progressing well, with key metrics including steady growth of ARPU (average revenue per user) and revenues showing impressive growth. ARPU is growing on the back of a solid retail distribution network, which accounts for an increasing proportion of high-value and high-bandwidth subscriber base. Further, the growing adoption of in-flight Wi-Fi services in commercial aircraft is proving conducive to growth of the Satellite Services business. Notably, the company delivered a stellar positive earnings surprise of 402%, on average, in the trailing four quarters.

What Does RSI Indicate?

RSI or ‘Relative Strength Index’ is a popular technical indicator. It compares average of gains in days that closed up to the average of losses in days that closed down. Readings above 70 suggest that an asset is overvalued, while that below 30 indicates undervalued conditions.

Viasat has an RSI reading of 16.54, which suggests that it is now in the undervalued territory, making it a solid investment pick.

Other Key Picks

Other top-ranked stocks in the industry include Motorola Solutions, Inc. MSI, PCTEL, Inc. PCTI and Qualcomm Incorporated QCOM, each carrying a Zacks Rank #2. 

Motorola has a long-term earnings growth expectation of 8.5%. It delivered a positive earnings surprise of 6.6%, on average, in the trailing four quarters.

PCTEL surpassed earnings estimates on each occasion in the trailing four quarters, the average positive surprise being 150.6%.

Qualcomm has a long-term earnings growth expectation of 18.9%. It delivered a positive earnings surprise of 10%, on average, in the trailing four quarters.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

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QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
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