Please ensure Javascript is enabled for purposes of website accessibility

Why Globalstar Stock Popped Today, Then Dropped

By Rich Smith - Updated Feb 17, 2021 at 12:17PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A new tech alliance sparks hopes for growth, but can it deliver?

What happened

Satellite communications stock Globalstar (GSAT 0.00%) exploded higher in morning trading Wednesday, rising nearly 20% before the enthusiasm passed. As of 11:35 a.m. EST, Globalstar's gains have been pared to just 2.5%.

So who was right? The folks who bought Globalstar hand over fist early this morning, or the ones who are having second thoughts? Let's take a quick look at the news that catalyzed the rally and find out.

Blackboard drawing of stock chart arrow going up being erased and pointing back down

Image source: Getty Images.

So what

This morning, Globalstar announced that it has formed a "global strategic alliance" with wireless technology company XCOM Labs, aiming "to commercialize XCOM's capacity-multiplying technology with Globalstar's Band n53 for dense 5G deployments in the US and in other countries." The aim of this alliance, in a nutshell, is to use XCOM's technology to boost the capacity of Globalstar's n53 spectrum by as much as "4x." If the spectrum can carry more traffic, the thinking goes, it will become more valuable to 5G internet providers.  

Now what

All of this of course sounds great in theory. What's lacking is any detail on how much more valuable the spectrum becomes in dollars and cents, or any estimate of how much more revenue (and profit) this might mean for Globalstar.

Globalstar, of course, lost money for three straight years before finally turning profitable in 2019 -- just in time to resume losing money again in 2020. With analysts continuing to forecast essentially stagnant revenues through 2022 at least, and net losses only increasing, reliable, measurable growth is what this stock really needs right now -- and today's PR doesn't quite provide it.

This article represents the opinion of the writer(s), who may disagree with the "official" recommendation position of a Motley Fool premium advisory service. We're motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Globalstar Stock Quote
Globalstar
GSAT
$1.31 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.