Globalstar, Inc. (GSAT) in Covington, La., offers mobile satellite services worldwide. The company's primary markets include recreation and personal, government, public safety and disaster relief, oil and gas, marine and fishing, construction, utilities, transportation, natural resources, mining, and forestry. In addition, it has formed a strategic partnership with XCOM Labs to commercialize XCOM's capacity-multiplying technology in conjunction with Globalstar's Band n53 for 5G installations in the United States and other countries where GSAT holds terrestrial rights.

The stock is up 26.7% in price over the past three months on the back of several positive developments, including increasing investor interest across the space ecosystem, agreements inked with Nokia, the Port of Seattle, and Ceres Tag, and an increase in C-Band spectrum auction investment.

However, in January, Morgan Stanley analyst Simon Flannery downgraded the stock to Underweight from Equal-weight, citing uncertainty about "a spectrum monetization event."

Here is what could shape GSAT's performance in the near term:

Poor Bottom line Performance

GSAT's total revenue increased 3.9% year-over-year to $34.48 million for the three months ended Dec. 31, 2021. However, its operating loss increased 3% from its year-ago value to $15.52 million. Its net loss grew 10.2% from the prior-year quarter to $23.96 million, while its loss per share came in at $0.01 over this period.

Stretched Valuation

In terms of forward Price/Sales, the stock is currently trading at 21.18x, which is 1255.3% higher than the 1.56x industry average. Also, its 23.95x forward EV/Sales is 958.5% higher than the 2.26x industry average. Furthermore, GSAT's 10.50x forward Price/Book is 31.4% higher than the 2.50x industry average.

Poor Profitability

GSAT's 0.15% trailing-12-months asset turnover ratio is 67.4% lower than the 0.45% industry average. Its $131.88 million trailing-12-months cash from operations is 56% lower than the  $299.40 million industry average. Also, its trailing-12-months ROA, net income margin, and ROC are negative 13.8%, 90.6%, and 5.6%, respectively.

Consensus Rating and Price Target Indicate Potential Downside

The one Wall Street analyst that rated GSAT rated it a Sell. The 12-month median price target of $1.03 indicates a 29.9% potential downside. The price targets range from a low of $1.03 to a high of $1.03.

POWR Ratings Reflect Uncertainty

GSAT has an overall D rating, which equates to a Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. GSAT has an F grade Value. The company's higher-than-industry valuation is consistent with the Value grade.

Among the 19 stocks in the F-rated Telecom – Domestic industry, GSAT is ranked #15.

Beyond what I have stated above, one can view GSAT ratings for Stability, Momentum, Growth, Quality, and Sentiment here.

Bottom Line

While GSAT's recent strategic collaboration with Nokia and other operational advancements has garnered significant investor attention and caused the stock to skyrocket in price, investors could get concerned about GSAT's prospects based on its poor fundamental performance and consensus ratings. Therefore, we believe the stock is best avoided now.

How Does Globalstar Inc. (GSAT) Stack Up Against its Peers?

While GSAT has an overall D rating, one might want to consider its industry peers, InterDigital Inc. (IDCC), which has an overall A (Strong Buy) rating, and Ooma Inc. (OOMA), which has an overall B (Buy) rating.

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