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Viasat's (VSAT) Antenna to Boost SES Networks' Satcom System

Zacks Equity Research
Updated

Viasat Inc.’s VSAT solid-state, fully-electronic phased array flat panel antenna has been chosen by SES Networks for the O3b mPOWER satellite communications (satcom) system. The flat panel antenna will be employed in a new generation of customer edge terminals for several applications on the O3b network and improve the delivery of satellite-based connectivity globally.

Viasat's antenna technology culminates years of commercial innovation and investment in research and development (R&D). It is a compact, lightweight solution for fixed as well as mobile broadband terminals and is scalable. The antenna will allow SES Networks to target different types of users with varying broadband connectivity requirements.

The Viasat phased array leverages proprietary flat panel core technology, which includes a new radio frequency integrated circuit and a modular approach that supports multiple types of user terminals (ranging from residential broadband to in-flight Wi-Fi to connected car and backhaul applications)  to meet increasing broadband connectivity demands.

In February, Viasat rolled out the fastest satellite internet available in the United States, powered by the new ViaSat-2 satellite system. ViaSat-2 is a $625-million high-capacity satellite launched by the company in June 2017. The satellite also powers fast in-flight Wi-Fi for JetBlue, American Airlines, United Airlines and other commercial carriers and government customers. ViaSat-2 satellite system provides service to North America, Central America, the Caribbean and a small part of northern South America.

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ViaSat-2 is expected to have twice the bandwidth and seven times more broadband coverage. It is a massive improvement over ViaSat-1. Some other features which make it more powerful than ViaSat-1 include high-capacity connectivity, smaller gateway antenna and twice as many gateways. Viasat believes that these advanced smaller gateways can help it place the latest satellites in proximity of popular Internet access points, delivering greater network reliability and security.

Viasat is already building its next-generation high-capacity satellite system — ViaSat-3 — which is expected to expand its network worldwide.

The satellite business is a burgeoning space and is one of the fastest growing segments of the $350-billion space industry. Significant demand for higher speeds of broadband connectivity in residential, in-flight and government markets are likely to boost Viasat’s growth momentum in the near term.

In recent quarters, Viasat’s earnings have suffered due to R&D expenses. The primary dampeners are the ViaSat-3 payload, pre-flight development and testing, commercial in-flight connectivity, STCs and line-fit activity. This indicates that we can expect more pressure on profits in the upcoming quarters. Viasat’s shares have gained just 11.3% in the past year, underperforming the industry’s gain of 13%.

 

Further, costs related to the ViaSat-2 service launch activities and preparations for the large-scale in-flight Wi-Fi ramp are expected to dent the bottom line in the upcoming quarters. The company anticipates heavier advertising activity over the next several quarters, which will raise costs and hurt margins.

Zacks Rank & Stocks to Consider

Viasat carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the same space include HP Inc. HPQ, Motorola Solutions, Inc. MSI and Harris Corporation HRS, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

HP Inc. has a decent earnings surprise history. The company recorded an average positive surprise of 4.8% over the trailing four quarters, beating estimates thrice.

Motorola Solutions has a decent earnings surprise history for the preceding four quarters, beating estimates each time, with an average positive surprise of 11.8%.

With four back-to-back earnings beats, Harris Corporation has an average positive surprise of 6.7%.

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