Globalstar (NYSEAMERICAN:GSAT) has been on a roller coaster ride so far in 2021. GSAT stock, a satellite communications and internet-of-things (IoT) play, zoomed from 34 cents to just over $2.50 per share during February’s “meme stock” mania.
Then, in the spring — as this trend cooled — shares dipped back to around $1 per share. A second meme stock wave renewed the buzz around it. It went up. And then it went down, through the summer. Only to see a glimmer of new hope in late August thanks to a rumors of a possible game-changing catalyst: a partnership deal with one of the world’s largest tech companies.
It didn’t take long for the Reddit trading community to pile back in en-masse. By early September, it was back near its past meme stock price levels. Unfortunately, like its past spikes, the pop didn’t last long. When the company it was supposed to partner up with revealed its plans, which didn’t include Globalstar, the Reddit trader army quickly left the scene.
GSAT stock is back to between $1 and $2 per share. Pessimism about its future is rising again.
So with all of that in mind, should you take a hard pass on this opportunity? Not so fast.
One game-changer may be off the table. Yet with plenty more potential catalysts in play, it’s too early to throw in the towel here. A rapid move to $3 per share and beyond remains possible. Here’s what you need to know.
Why the Bull Case for GSAT Stock Remains
The current bearish sentiment around Globalstar shares makes sense. With the hopes of big-name partnership dashed, many believe it has few other potential catalysts at play.
However, based on the previous case I’ve made for GSAT stock, that’s clearly not so. Simply put, the game-changing deal it failed to lock down in September wasn’t its only shot of soaring to much higher prices.
First, as Globalstar’s CEO David Kagan teased back in August, the company had another possibly game-changing deal in the works, with a company in the alternative energy space.
Admittedly, it’s probably not going to be the kind of needle-mover the aforementioned big tech partnership would’ve been. Nevertheless, this deal (assuming it’s still in motion) could materially improve the company’s operating results. Also, given that it’s an IoT related deal, success with it could possibly help GSAT win over other end-users of commercial IoT services.
Outside of other big deals that could get finalized soon, another factor points to stronger results going forward. Specifically, the company’s “positive subscriber behavior,” which it pointed out in its latest earnings report.
Bears may be too focused on past results, or on analyst projections that call for little sales growth between this year and the next. But many leading indicators (for instance, satellite equipment sales) hint that results could come in far better than currently anticipated.
Downside May Be Less Than It Seems
As a low-priced, small-cap name, GSAT stock is very risky and volatile. But while it’s a name where caution is key, downside risk with Globalstar may not be as high as it seems on the surface.
Sure, with a market capitalization of $2.69 billion, versus projected sales of between $118.6 million and $124.8 million next year, it trades at a high price-to-sales multiple. Thus, it looks overvalued.
But B. Riley’s Mike Crawford doesn’t agree. Back in June, the sell-side analyst argued why GSAT stock contains a lot of hidden value. Between the value of its C-band spectrum (even if it is only able to monetize a portion of it), and its massive tax-loss carryforward (which could shelter future profits from taxation), Globalstar’s underlying value is well above what it trades for today.
With these “hidden assets” not so hidden anymore, increased awareness of its true underlying value may prevent the stock from falling below the $1 to $1.50 per share floor it has had since the spring.
The Bottom Line on GSAT Stock
There may be enough underlying value to prevent Globalstar from cratering in price again. But this alone isn’t going to send it soaring once more. It’s either going to need to lock down a “big deal,” or see an overall improvement in its operating results, before it spikes again.
Fortunately, both catalysts remain in play. Its much-discussed rumored deal with a big tech name may have failed to happen. But a prior big deal teased previously likely remains in the works. Even if said deal fizzles out too, results in the coming year could see big improvement from the numbers reached in the prior year.
Coming in with a “B”-rating from Portfolio Grader, GSAT stock has more than enough potential to make it an appealing play for investors willing to stomach its potential risk.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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