On Tuesday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on ViaSat (NASDAQ:VSAT), a global communications company, reducing the price target to $22 from the previous $23 while keeping a Hold rating on the stock. This change follows the company's recent earnings report and an update to its growth projections.
The bank's analyst cited several factors for the revised price target, including a decreased growth trajectory for ViaSat. The lowered expectations are attributed in part to a reduced contribution from In-flight Connectivity (IFC) services due to delays in the Boeing (NYSE:BA) 737 MAX aircraft. Additionally, there is a slight increase in pressure within the maritime VSAT sector, as Starlink targets crew welfare services.
Despite these challenges, the analyst noted that synergies within ViaSat's operations appear to be mitigating many of the negative impacts, thus supporting the company's EBITDA (earnings before interest, taxes, depreciation, and amortization). The guidance provided by ViaSat is seen as attainable, with potential for upside if the company realizes significant savings in supply chain and procurement costs.
In the upcoming quarter, ViaSat is expected to introduce a new reporting structure, dividing its business into two segments: "Communication Services" and "Defense and Advanced Technologies." Each segment will provide revenue details for the major business units contained within. The analyst believes this change will be welcomed by investors, who have found the current reporting structure to be complex.
The new price target of $22 is based on a 5x multiple of ViaSat's projected 2024 EBITDA. Despite the reduction in the target price, Deutsche Bank's Hold rating remains unchanged, suggesting that the firm advises investors to maintain their current position in the stock without increasing or decreasing their holdings.
InvestingPro Insights
Following Deutsche Bank's revised outlook on ViaSat (NASDAQ:VSAT), InvestingPro data provides a deeper look into the company's financial health and market performance. With a market capitalization of $2.01 billion, ViaSat is trading at a low Price / Book multiple of 0.4, suggesting that the stock may be undervalued relative to the company's asset value. Despite significant revenue growth over the last twelve months, with an increase of 67.59%, ViaSat has been facing challenges, as reflected by a negative P/E ratio of -1.77 and a substantial year-to-date price total return decline of -42.63%.
InvestingPro Tips indicate that ViaSat operates with a significant debt burden and is quickly burning through cash. These factors, combined with a stock price that has taken a significant hit over the last week, underscore the risks associated with investing in the company. However, it's notable that ViaSat's liquid assets exceed its short-term obligations, providing some financial flexibility. Analysts predict the company will be profitable this year, which could be a turning point for the stock. For investors seeking a more comprehensive analysis, there are an additional 10 InvestingPro Tips available, which can be accessed through InvestingPro. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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