3 Stocks to Watch From the Satellite and Communication Industry

Macroeconomic uncertainty amid tariff troubles, inflation and supply chain dynamics could affect the Zacks Satellite and Communication industry's growth prospects. Moreover, high capital expenditure and long return-on-investment cycles can strain profitability for the existing participants and deter new players from entry. Near-term headwinds aside, the industry’s outlook is being driven by the convergence of rapid technological progress and growing global connectivity requirements. The expansion of internet in remote areas through emerging low Earth orbit (LEO) constellations is driving demand for satellite broadband services.

Increasing proliferation and cheaper access to space technology are leading to a diversification in end-market users. AI, Machine Learning, and Big Data have given rise to multiple use cases across industries like oil and gas, agriculture, transportation and non-governmental organizations. Iridium Communications IRDM, Globalstar GSAT and Gilat Satellite Networks Ltd. GILT have significant growth potential in global security threats, surging defense budgets, and demand for high-quality imagery and value-added services. 

Industry Description

The Zacks Satellite and Communication industry comprises space technology companies that provide satellite imagery, intelligence services, and spacecraft and robotics for space exploration, research and national security. They help customers understand and navigate the evolving planet, deliver global broadband communications, and explore space. These companies provide communication services to media businesses, fixed and wireless telecommunications operators, data networking providers and Internet service providers. They also offer commercial satellite communication services to government and military organizations. The firms provide satellite-based consulting and technical services, including the lifecycle of satellite operations and infrastructure, ranging from satellite and launch vehicle procurement to telemetry and commanding services.

What's Shaping the Industry's Future?

Advancements in Technology Hold the Key: There has been a radical change in highly specialized satellite manufacturing patterns. More emphasis is put on using ordinary buses and computer-aided design tools to customize the communications payloads. A mass-produced system is adopted, and several satellites are manufactured in an assembly line. Integration and testing have become highly automated. The extent of testing is lowered after prototyping and initial production is completed. Countries with comprehensive space programs have distinct military, economic and scientific advantages. However, complexity and barriers to entry into space have allowed only a few to develop notable capabilities. The demand for small satellites across regions is expected to increase over time. North America has the bulk of the market share, followed by the Asia Pacific, Europe and the rest of the world. North America maintains its dominance with the highest number of small satellite launches by government end users. The companies continue to align their products and services with the needs of the U.S. Department of Defense’s National Defense Strategy and the growing demand for international defense and intelligence.

Subscriber Momentum to Drive Growth: Wide proliferation and cheaper access to space technology have diverse end-market users. The companies share a strategic relationship with various government organizations, including military and disaster response agencies and non-governmental organizations, to provide robust, tactical, real-time voice and low-latency data command and control communications. A comprehensive product portfolio enables companies to expand their customer base and offset the losses from one product category with benefits from another. High product quality increases brand loyalty and enhances performance in a competitive market. For civil customers, notably NASA, growth is being driven by space exploration programs. For commercial customers, growth drivers include a strong demand for imagery due to new use cases, space-based remote sensing, Geosynchronous Equatorial Orbit (GEO) replacement demand and LEO communications programs. Advanced mobile networks need strong backhaul and global infrastructure, thereby increasing reliance on satellite support for rural and oceanic coverage.

Spending on Space Infrastructure Could be Affected by Macroeconomic Weakness: With more than half of revenues from U.S. government customers, the industry will likely benefit from increasing defense and space infrastructure budgets. The explosion of space-based intelligence, surveillance, and reconnaissance and communications is expected to boost government investments in the sector. However, weakness in global macroeconomic conditions amid tariff troubles could compel customers to lower spending, which does not bode well for industry participants. Volatile supply chain dynamics and inflation could lead to higher costs and increased lead time, which are major concerns. Also, competition from fiber optics and terrestrial networks, in certain regions, could also deter the growth of the industry participants as these may offer relatively lower costs.

Zacks Industry Rank Indicates Bleak Prospects

The Zacks Satellite and Communication industry is housed within the broader Zacks Computer and Technology sector. It currently has a Zacks Industry Rank #157, which places it in the bottom 36% of more than 246 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

Before we present a few satellite and communication stocks you may want to consider for your portfolio, let’s look at the industry’s recent stock market performance and valuation picture.

Industry Outperforms Sector, S&P 500

In the past year, the Zacks Satellite and Communication industry outperformed the S&P 500 composite and the broader Zacks Computer and Technology sector.

The industry has gained 23% over this period compared with the S&P 500’s return of 7.7%. The broader sector has moved up 6.7%.

One-Year Price Performance

Industry's Current Valuation

The Enterprise Value-to-EBITDA (EV/EBITDA) ratio is commonly used for valuing satellite and communication stocks. The industry has a trailing 12-month EV/EBITDA of 16.63X compared with the S&P 500’s 15.10X. The sector’s trailing 12-month EV/EBITDA stands at 15.73X.

In the past five years, the industry has traded as high as 18.07X and as low as 7.48X, with a median of 8.13X, as the chart below shows.

3 Stocks to Watch Amid Industry Headwinds

Iridium Communications: Headquartered in McLean, VA, Iridium offers dedicated commercial global voice and data communications services to both businesses and governments in the United States as well as globally. 

Higher service revenues drove Iridium's first-quarter performance amid ongoing global macroeconomic turbulence. Strength in Service revenues was backed by unique service launches and subscriber gains. An uptick in subscriber base, with 2.4 million billable subscribers at the end of the quarter, rising 5% year over year, bodes well. 

Due to higher deal wins from the U.S. government, notably, the ongoing projects on the SDA, engineering and support sales rose 23% year over year. Momentum in its next-gen IoT, alternate PNT from Satelles and D2D with NTN Direct is a tailwind. Share buybacks are noteworthy.

Iridium reaffirmed its 2025 guidance, expecting service revenue growth of 5-7% and OEBITDA in the $490-$500 million band, up from $470.6 million in 2024. However, tariff uncertainty, stiff rivalry, and evolving cyber threats pose concerns.

IRDM currently carries a Zacks Rank #3 (Hold). The earnings estimate for 2025 is pegged at $1.04, up 3 cents in the past seven days. The stock has declined 13.4% in the past six months.  

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: IRDM

The company’s efforts to boost the development of its spectrum and wholesale capacity services (especially within government and consumer verticals) bode well. GSAT’s Band n53 is a steady and growing spectrum resource without borders, gaining momentum as a critical enabler of 5G innovation.

Steady growth in Service revenues and Subscriber equipment revenues is driving its top-line performance. In the fourth quarter of 2024, Service revenues (94.3% of total revenues) were up 17.8% year over year to $57.7 million. The $8.7 million increase in service revenues was primarily attributed to higher wholesale capacity services. This growth stemmed from fees earned through certain expanded services initiated in 2024, which are expected to continue under the Updated Service Agreements. Subscriber equipment revenues (5.7% of total revenues) climbed 1.1% year over year to $3.5 million.

In March 2025, GSAT inaugurated its cutting-edge Satellite Operations Control Center (“SOCC”) at its headquarters in Covington, LA. The SOCC is a crucial investment in Globalstar’s future, facilitating superior satellite fleet management, optimizing network performance and laying the groundwork for new satellite constellations that will reinforce the company’s dominance in global satellite communications. Before that, it teamed up with GCT Semiconductor Holding Inc. to engineer two-way satellite messaging systems for its mobile devices and modules. The initiative integrates GCTS’ cutting-edge IoT and 4G/5G semiconductor technology into Globalstar’s next-generation product suite.

Globalstar has reiterated its financial outlook for 2025, expecting total revenues to range between $260 million and $285 million. The company anticipates maintaining an adjusted EBITDA margin of approximately 50%.

GSAT currently carries a Zacks Rank #3. The current-year earnings are pegged at a loss of 20 cent, unchanged in the past 60 days. The stock has lost 33.1% over the past six months.  

Price and Consensus: GSAT

Strength in the defense sector bodes well for Gilat as demand for defense SATCOM solutions grows due to geopolitical dynamics. Several deal wins bode well for the Gilat Defense segment. In April 2024, Gilat Defense secured a multimillion-dollar order from a leading global defense organization. The contract involves the supply of cutting-edge antenna technology, which will be integrated into the organization’s advanced communication systems. Before that, Gilat Defense was awarded a significant contract to provide sustainment and support services for Satellite Transportable Terminal (STT) units used by the U.S. Department of Defense. The deal, which covers a base program with extension options for up to five years, is valued at up to $23 million.

Gilat Commercial division is gaining from the satellite industry’s shift to multi-orbit connectivity, driven by the need for resilient and seamless global coverage. Higher demand for IFC services is also emerging as an business opportunity. The buyout of Stellar Blu is likely to aid in ensnaring a larger share of IFC market. Gilat's Commercial unit offers advanced broadband satellite communication network solutions for enterprises and cellular backhaul. GILT expects 2025 revenues to be between $415 million and $455 million.

GILT currently carries a Zacks Rank #3. The current-year earnings are pegged at earnings of 50 cents, unchanged in the past 60 days. The stock has risen 17.3% in the past six months. 

Price and Consensus: GILT

 

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Iridium Communications Inc (IRDM): Free Stock Analysis Report
 
Gilat Satellite Networks Ltd. (GILT): Free Stock Analysis Report
 
Globalstar, Inc. (GSAT): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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