Globalstar (GSAT)

Satellite communications provider Globalstar (NASDAQ:GSAT) missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 6.3% year on year to $60.03 million. On the other hand, the company’s full-year revenue guidance of $272.5 million at the midpoint came in 3.1% above analysts’ estimates. Its GAAP loss of $0.16 per share was significantly below analysts’ consensus estimates.

Company Overview

Known for powering the emergency SOS feature in newer Apple iPhones, Globalstar (NASDAQ:GSAT) operates a network of low-earth orbit satellites that provide voice and data communications services in remote areas where traditional cellular networks don't reach.

Satellite telecommunication is generally buoyed by rising global demand for connectivity in costly-to-connect and remote areas. IoT (Internet of Things) expansion and government-backed space and defense initiatives also help. As advancements in low Earth orbit (LEO) technology happen, companies in the space will have more favorable competitive positions, which could lead to further partnerships with mobile network operators to extend coverage. On the other hand, headwinds include high capital expenditures for satellite deployment as well as regulatory hurdles related to spectrum allocation. Competition from larger players like SpaceX’s Starlink and Amazon’s Kuiper could also intensify over time, especially if tech advancements lead to better unit economics and financial prospects.

Globalstar's primary competitors in the satellite communications market include Iridium Communications (NASDAQ:IRDM), Viasat (NASDAQ:VSAT), and ORBCOMM. The company also faces emerging competition in the direct-to-cellular satellite service space from SpaceX's Starlink and other new market entrants.

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $253.9 million in revenue over the past 12 months, Globalstar is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.

As you can see below, Globalstar’s 13.6% annualized revenue growth over the last five years was exceptional. This is a great starting point for our analysis because it shows Globalstar’s demand was higher than many business services companies.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Globalstar’s annualized revenue growth of 20.7% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Globalstar’s revenue grew by 6.3% year on year to $60.03 million, missing Wall Street’s estimates.

We also like to judge companies based on their projected revenue growth, but not enough Wall Street analysts cover the company for it to have reliable consensus estimates. This signals Globalstar could be a hidden gem because it doesn’t get attention from professional brokers.

Globalstar’s high expenses have contributed to an average operating margin of negative 19.6% over the last five years. Unprofitable business services companies require extra attention because they could get caught swimming naked when the tide goes out.

On the plus side, Globalstar’s operating margin rose by 51.8 percentage points over the last five years, as its sales growth gave it operating leverage. Still, it will take much more for the company to reach long-term profitability.

Globalstar’s operating margin was negative 14.2% this quarter.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Globalstar’s full-year EPS was flat over the last five years. Its performance was underwhelming, but at least the company is doing well in other parts of the business.

In Q1, Globalstar reported EPS at negative $0.16, down from negative $0.15 in the same quarter last year. This print missed analysts’ estimates. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data. This signals Globalstar could be a hidden gem because it doesn’t have much coverage among professional brokers.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Globalstar has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 27.9% over the last five years. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Taking a step back, we can see that Globalstar’s margin expanded by 96 percentage points during that time. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

Globalstar’s free cash flow clocked in at $47.56 million in Q1, equivalent to a 79.2% margin. Its cash flow turned positive after being negative in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Globalstar has shown solid business quality lately, it struggled to grow profitably in the past. Its five-year average ROIC was negative 5.7%, meaning management lost money while trying to expand the business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Globalstar’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.

Globalstar reported $241.4 million of cash and $537 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $130.7 million of EBITDA over the last 12 months, we view Globalstar’s 2.3× net-debt-to-EBITDA ratio as safe. We also see its $17.72 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was great to see Globalstar’s full-year revenue guidance top analysts’ expectations. On the other hand, its revenue, EPS, and EBITDA missed. Overall, this was a weaker quarter. The stock traded down 3.6% to $19.45 immediately after reporting.

Updated: May 22, 2025 at 11:57 PM EDT

Before deciding whether to buy Globalstar or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Globalstar possesses a number of positive attributes. First off, its revenue growth was exceptional over the last five years. And while its relatively low ROIC suggests management has struggled to find compelling investment opportunities, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits. On top of that, its rising cash profitability gives it more optionality.

Globalstar’s EV-to-EBITDA ratio based on the next 12 months is 22.6x. Looking at the business services landscape right now, Globalstar trades at a pretty interesting price. For those confident in the business and its management team, this is a good time to invest.

Wall Street analysts have a consensus one-year price target of $52.50 on the company (compared to the current share price of $18.33), implying they see 186% upside in buying Globalstar in the short term.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

To get the best start with StockStory, check out our most recent stock picks, and then sign up for our earnings alerts by adding companies to your watchlist. We typically have quarterly earnings results analyzed within seconds of the data being released, giving investors the chance to react before the market has fully absorbed the information. This is especially true for companies reporting pre-market.