What happened
Shares of Globalstar (GSAT 1.17%) were up 17.8% through 10:35 a.m. EDT on Monday, and it's not hard to figure out why.
This morning, investment bank B. Riley (RILY 4.91%) initiated coverage of Globalstar with a buy rating and a target price of $3.25 on the stock, currently at $1.50 or so -- a clean double, plus a little bit more.
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So what
According to Riley, "Globalstar and its sponsors, after years of development, support, and patience, are at long last starting to realize a return on satellite system and spectrum assets, making 2021 an excellent time, in our opinion, to buy GSAT." In a note covered by StreetInsider.com, the analyst said the company is now "poised" to begin monetizing the 2.4 gigahertz S-Band spectrum that it has licensed in the U.S., as well as its 2.4 megahertz international spectrum.
The note added that Globalstar operates a mobile satellite services business that is generating positive operating cash flow, and "we believe [that cash flow] actually bottomed in [the first quarter]," so it could even be growing.
Now what
What does all this mean in dollars and cents? Riley argues that "at the high end," Globalstar's C-Band spectrum alone could be worth some $15 billion. But Riley doesn't think you even need to stretch that far to find value in the stock.
Estimating that the company's terrestrial spectrum, its mobile satellite services business, and its tax loss carryforwards are worth a combined $4.5 billion in enterprise value ($2.35 per share), the analyst argues that if Globalstar realizes even just 15% of the value of its C-Band and L-Band spectrum, this could add approximately $0.90 a share to the stock's value, resulting in a total target price on the shares of $3.25 each.
