Electronic communications infrastructure has been evolving ever since 1854 when an American banker named Cyrus West fields first thought of laying cables across the bottom of the Atlantic.
Now, that infrastructure is overdue for another breakthrough, and that breakthrough will create a massive profit opportunity for us.
Right now, there are 550,000 miles of cable running across the bottom of the ocean. They are enough to circle to the earth some 22 times, and they are absolutely brimming with web traffic. And they are not enough.
Today, some 3.7 billion people lack web access largely because they live in areas without ground infrastructure.
And that creates an opportunity for a savvy tech firm, ready to take the next step and provide satellite-based web services. They will face huge upside in a market valued at $123 billion
Now then, there’s no question that satellite communications companies suffered in the 1990s.
Back then, the industry and Wall Street thought millions of consumers would be clamoring for satellite phones.
Unfortunately, it turned out to be a very small niche that never really caught fire. And now that high-speed 5G is coming to smart-phones, that segment will likely grow little in the next few years.
Now, I’ve been keeping a close eye on the buildout of 5G wireless networks, and the huge potential they have to bring other, data-heavy industries along with them to incredible growth potential.
And you can see exactly which investments I think are going to make the best plays on this overwhelming trend, and the other most overwhelming trends redefining the market in 2021, in my Nova-X Report newsletter.
You can get started with it by clicking right here.
But for now, I want to stress that the future for satcom firms lies in providing broadband Internet coverage.
After all, the World Economic Forum says that just over half the population on Earth lack Web access.
And while that’s a great market to be in, we also want to see a satcom leader that has a broad enough customer base to include industry and the government.
Make no mistake this is a fertile market. The Satellite Industry Association list $123 billion in service sales for 2019, the last year for full data.
Of course, you might be thinking that I have space entrepreneur Elon Musk in mind.
Sure, his Starlink satellite service from SpaceX gets tons of press. Musk plans to put a stunning 12,000 mini-satellites in orbit in the next few years.
But the firm I’m about to reveal is planning to cover the globe with just three big birds. One goes up later this year, followed by another in 2022.
Here’s the thing. California-based Viasat Inc. (VSAT) has been building a global satellite communications firm since 1986. And it has been adding strategic acquisitions for years to build out its sophisticated operations.
Yes, ViaSat offers residential Web service. But its network now covers the business, defense, and aviation markets. it also provides ground networks, maritime services, and cybersecurity.
In other words, this is a firm that covers the satellite communications space pretty much from stem to stern.
And it’s not just relying on organic growth for sales and profits. This is a company that likes to make bolt-on acquisitions that will build out the franchise.
As a matter of fact, it just added a new $222 million niche satellite firm in late December. Its purchase RigNet Inc. (RNET) expands its reach in the industrial sector.
See, RigNet specializes in energy services. It provides monitoring for tankers, pipelines, fracking wells, and other aspects of far-flung ventures in the exploration, production, and transmission of fossil fuels.
RigNet not only adds to ViaSat’s core expertise, it is also expected to add to the bottom line this year. It also brings a suite of sophisticated tools like machine learning and artificial intelligence.
Rock Solid Contracts
Meantime, the firm continues to gain steam in the market for secure satellite communications.
Just last month, the British military announced it was expanding and upgrading its “Skynet” communications system. ViaSat is the key contractor.
Modern military communications are especially demanding and any company that supports the US and allies’ armed forces has proven its reliability, security, and quality.
To get that kind of quality, military clients tend to pay big and stick with the companies that they contract with for the long term. It’s not feasible to swap into and out of systems just because someone came in with a lower bid.
Refitting all the equipment is expensive and retraining people is time-consuming.
This is a steady sector, and ViaSat is well represented around the globe.
In fact, here at home, the firm has served as a defense communications contractor for at least 15 years. It’s also designing a new platform for the Pentagon’s Space Force
The firm has not announced a contract with that agency. But on February 2, it snagged a $50 million contract with the U.S. Air Force for a prototype of advanced space communications systems.
The Bottom Line
Add it all up and you can see why the stock has caught fire this year on the strength of contracts like that one and the RigNet Merger.
So far this year, VSAT has gained 51.6% as of the close of trading on March 5. That means it beat the S&P 500’s 2.3% return by 2,143.
To be sure, earnings have remained weak in the last three years as the firm has continued to invest in its sprawling network.
But all the ingredients are now in place for a strong turnaround that should continue to propel the stock’s advance.
This is one of those investments where a small amount of risk capital could yield big returns, windfall profits that can really boost the value of your tech portfolio.
Cheers and good investing,
Michael A. Robinson