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Why Globalstar Stock Dropped 8% Today

By Rich Smith - May 7, 2021 at 1:34PM

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Globalstar delivers a sales miss -- and Wall Street predicts more of the same.

What happened

Shares of Globalstar (GSAT 0.00%) stock dropped 8.1% through 1:35 p.m. EDT Friday, after the mobile satellite services provider released its fiscal Q1 2021 earnings report yesterday -- meeting on earnings but missing on revenue.

Heading into fiscal Q1 2021, analysts had predicted Globalstar would lose $0.02 per share -- and it did that. But analysts had thought the company would be able to do at least $32.2 million in revenue for the quarter, and that's where it fell short, reporting revenue of only $26.9 million.  

Glowing red stock chart arrow trending down

Image source: Getty Images.

So what

And yet, the news wasn't all bad.

As Globalstar explained, "Total revenue for the first quarter of 2021 decreased 16% from the first quarter of 2020; however, this decline was due primarily to the timing of engineering service revenue." CEO Dave Kagan pointed out, "both service and equipment revenue [were higher] than pre-pandemic levels in the first quarter of 2020," something that management did not expect to see happen until "the second half of this year." And indeed, while total service revenue (which include engineering service) declined year over year, subscriber equipment sales did grow 17.9%.

Accordingly, despite the revenue miss, Globalstar remains optimistic about its business, and in particular the commercial Internet of Things (IoT) space, where it's chasing "a large opportunity, potentially north of 100,000 units ... in the alternative energy segment."  

Now what

Despite this optimism about IoT, however, management declined to offer specific financial guidance on how it expects the rest of this year to play out -- a fact that may be weighing on the shares today. For now, all we really have is analyst guidance to go on, and analysts are far from optimistic, predicting continued losses both this current Q2, and for the year as a whole, and no revenue growth at all before 2022.

No wonder investors are disappointed.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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