Iridium stock rises after Barclays upgrades on attractive risk/reward
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Barclays Capital upgraded Iridium Communications (NASDAQ:IRDM) to Overweight from Equal Weight and reduced the price target on the stock to $65 from $66.
Iridium reported Q2 results on Tuesday and reiterated its FY guidance but the stock fell (-15.64% Tuesday) sharply as management indicated that the upcoming D2D revenue opportunity would take time to grow. The analysts said this is in line with the scenario they had in mind, and they now consider the risk/reward attractive and were upgrading to Overweight.
Barclays analysts noted that in a recent report they evaluated the revenue opportunity of the Direct to Device (D2D) service which they think is material. Iridium had signed a deal with Qualcomm (QCOM) in January 2023 under which Qualcomm (QCOM) will incorporate the Iridium frequencies into its upcoming chips which are used in Android Smartphones.
The analysts believe this will represent a strong source of revenues for Iridium, but will be gradual (c. $90M by 2027). The analysts added that their view is in line with management comment, but considering the stock price correction on the day of the results, expectations were likely more bullish. After this reset the analysts now see an attractive risk/reward and upgraded Iridium to Overweight.
The firm noted that Iridium reported another set of solid numbers and reiterated its FY guidance, and while equipment revenues came in below expectations, this was offset by lower costs (notably compared to consensus). All 2023-25 guidances were reiterated.
The analysts added that they reduced their price target on IRDM by 2% to reflect a slightly higher debt estimate.
IRDM +4% to $53 premarket July 27
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