Why EchoStar (SATS) Stock Is Up Today

What Happened?

Shares of satellite communications company EchoStar (NASDAQGS:SATS) jumped 17.4% in the afternoon session after the company announced a significant deal to sell wireless spectrum licenses to SpaceX for approximately $17 billion. 

The agreement involves SpaceX paying up to $8.5 billion in cash and issuing up to $8.5 billion in its own stock to EchoStar. Furthermore, the deal provides EchoStar with substantial financial relief, as SpaceX will cover approximately $2 billion in interest payments on EchoStar's debt through November 2027, a move that significantly bolsters the company's balance sheet. In addition to the asset sale, the two companies will enter a long-term commercial agreement, allowing EchoStar's Boost Mobile subscribers to access SpaceX's next-generation Starlink Direct-to-Cell satellite service.

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What Is The Market Telling Us

EchoStar’s shares are extremely volatile and have had 39 moves greater than 5% over the last year. But moves this big are rare even for EchoStar and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 12 days ago when the stock gained 13.6% on the news that the stock extended its positive momentum as the company announced a $23 billion deal to sell some of its wireless spectrum licenses to AT&T. The all-cash transaction provides AT&T with valuable mid- and low-band spectrum to enhance its 5G and broadband services across the U.S. For EchoStar, the owner of Dish Network and Sling TV, this deal provides a significant financial boost, clearing up uncertainty that had weighed on the company. The proceeds will allow EchoStar to pay down a large portion of its debt and help resolve an FCC investigation that had raised concerns about its financial stability. In response to the news, TD Cowen significantly raised its price target on the stock to $67 from $28, citing the company's improved financial position and the newly unlocked value of its remaining spectrum assets.

EchoStar is up 249% since the beginning of the year, and at $79.44 per share, has set a new 52-week high. Investors who bought $1,000 worth of EchoStar’s shares 5 years ago would now be looking at an investment worth $2,821.

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