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.
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.
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.