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ViaSat Crosses Key Milestone with ViaSat-3's Design Review

Zacks Equity Research

Wireless equipment player, ViaSat Inc. VSAT, along with The Boeing Company BA, announced that the first two ViaSat-3 class satellites had crossed a key milestone last week, as they successfully completed their Preliminary Design Review (“PDR”).

The company has grand expansion plans for its ViaSat-2 and ViaSat-3 satellites, which promise tremendous growth potential, over the long run. This step validates that the company is on the right track and progressing well, as ViaSat and Boeing continue to integrate the former’s communications payload with Boeing's upgraded platform.

ViaSat's shares have recorded an average return of 12.5% year to date, in stark contrast to the Zacks categorized Wireless Equipment industry’s negative average return of 6.2%. Encouragingly, the company has a striking average positive surprise of 315.3%, beating estimates twice over the trailing four quarters.

It seems that analysts are also turning increasingly bullish on the company’s prospects. ViaSat has been witnessing solid activity on the earnings estimate revision front, as the Zacks Consensus Estimate for fiscal 2017 earnings has sharply trended up over the same time frame, from 6 cents, 60 days ago, to 40 cents today.

The completion of PDR is an important step toward verifying that the ViaSat-3 satellites will meet the required performance specifications and requirements, when operating on orbit. ViaSat and Boeing can now begin comprehensive design work on the satellites, the first of which is expected to launch in 2019. The first two satellites will focus on the Americas and on Europe, the Middle East and Africa, respectively. A third satellite is being designed, for the Asia Pacific region, which will complete ViaSat's global service coverage.

It is anticipated that the ViaSat-3 class of Ka-band satellites will offer unmatched capabilities, in terms of both service speed and flexibility. Each ViaSat-3 class satellite will likely deliver network capacity of over 1-Terabit per second and will dynamically direct capacity to the locations of the customers.

The ViaSat-3 satellite platform is set to revolutionize satellite broadband communications across the world. It will provide enough capacity for an affordable, high-speed, high-quality internet and video streaming service, spanning the entire globe.

In addition to great prospects in the satellites space, ViaSat is enjoying steady growth in government and commercial air, in-flight Internet services and mobile broadband end markets. However, persistent weakness in the Commercial Networks segment, due to soft sales of large integrated antenna systems programs, has been hurting the company’s financials.

Also, its huge research and development expenses, related to the satellites, may cast a material impact on its margins and bottom line in the times ahead. Thus, the company’s prospects, though bright, remain vulnerable to operational headwinds.

Zacks Rank and Key Picks

ViaSat carries presently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader computer & technology sector include Aspen Technology, Inc. AZPN and Guidance Software, Inc. GUID, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aspen Technology deals in process optimization software and services. It boasts a remarkable average surprise of 23.6%, over the trailing four quarters, having surpassed estimates strongly in each of them.

Guidance Software, an industry leader in digital investigative solutions, also has an impressive earnings history. The company has beaten estimates in all the four trailing quarters, with an average surprise of 18.6%.

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VIASAT INC (VSAT): Free Stock Analysis Report
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