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Why Intelsat Stock Just Jumped 12% (Again)

Rich Smith, The Motley Fool

What happened

Shares of communications satellite operator Intelsat (NYSE: I) jumped more than 12% early Tuesday -- for the second day in a row -- before closing the day up a still-respectable 10.9%. Once again, the catalyst for the move appears to have been a simple press release.

On Tuesday, Intelsat announced that Vodacom Business Nigeria has signed a "multi-year agreement" to use Intelsat's Intelsat 35e satellite "to deliver fast, high-quality and resilient broadband connectivity to the banking, oil and gas, and enterprise sectors across West Africa."

Satellite beaming down to Earth

Intelsat beams down another press release, and its stock price rises yet again. Image source: Getty Images.

So what

Financial details of the new contract were not disclosed. Rather, the importance of this announcement appears to be in the geographical details: "It can be difficult to reach certain locations across Africa," Intelsat quoted Vodacom Business Nigeria Managing Director Lanre Kolade as saying. But such access is "made possible following the newly signed agreement with Intelsat" and will provide Vodacom's customers with "higher data rate applications" than they previously had access to.

Now what

Does this single contract justify increasing Intelsat's market capitalization by nearly 11%? That's hard to say without knowing more about the financial implications. Still, despite its massive debt load (nearly $14 billion net of cash), Intelsat remains a company with a very small market cap. Today's increase actually adds less than $77 million to the value of the company -- a drop in the bucket relative to Intelsat's $14.6 billion enterprise value.

I can't say definitively that the price spike is justified, but given the small absolute increase in market value, I can easily imagine how it might be.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.