On Tuesday, ViaSat Inc. (NASDAQ:VSAT) experienced a change in its stock outlook as JPMorgan downgraded the company from Overweight to Neutral. The adjustment in rating comes with a significant reduction in the price target, now set at $15.00, a drop from the previous $29.00 target. This decision follows recent developments involving United Airlines' decision to transition over 1000 mainline aircraft from current In-Flight Connectivity (IFC) providers, including ViaSat, to a new provider, Starlink.
The downgrade is a direct response to last week's announcement by United Airlines. The airline's shift to Starlink for IFC services is expected to start with trials next year, leading to a projected loss for ViaSat. The impact on ViaSat's business is estimated to be $60-80 million, which translates to approximately 1-2% of the company's forecasted revenue for the fiscal year 2025. The forecast considers the potential loss of both direct service aircraft, estimated at 250, and additional planes that utilize ViaSat's satellite capacity through LiveTV/Thales.
The full effect of this transition is anticipated to materialize in the calendar year 2027, coinciding with the expiration of long-term IFC contracts. Despite the setback with United Airlines, ViaSat has secured several IFC contracts recently, including agreements with LOT Polish Airlines, Korean Air, Royal Jordanian Airlines, and Icelandair. These wins suggest competitive resilience against Starlink, but the scale of United Airlines' decision indicates a significant risk to ViaSat's long-term market share within the IFC and broader mobility segments.
InvestingPro Insights
In light of ViaSat Inc.'s (NASDAQ:VSAT) recent stock outlook change by JPMorgan, InvestingPro provides additional context to the company's financial health and market position. ViaSat's market capitalization stands at $1.73 billion, reflecting the size and scale of the company within the industry. Despite a challenging period, ViaSat trades at a low Price / Book multiple of 0.34 as of Q1 2025, which might attract investors looking for undervalued stocks. However, the company's significant debt burden and its rapid cash burn rate, as noted in InvestingPro Tips, are critical factors for investors to consider.
Revenue for ViaSat has seen an impressive growth of 67.71% over the last twelve months as of Q1 2023, indicating a strong top-line performance. Nonetheless, the company has been struggling with profitability, as it has not been profitable over the last twelve months. This is corroborated by a negative P/E ratio of -1.66, which signals that the company is currently not generating net income. An InvestingPro Tip also highlights that analysts predict the company will be profitable this year, offering a potentially brighter outlook for investors.
For those interested in a deeper analysis, InvestingPro offers additional tips on ViaSat, providing a comprehensive view of the company's financial metrics and future prospects. To explore these insights, readers can visit https://www.investing.com/pro/VSAT for further details on ViaSat's performance and projections.
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