IRDM - Overreaction To Capex Guidance Makes Iridium Communications Cheap

2024-02-26 03:51:06 ET

Summary

• Iridium Communications' stock dropped 20% after recent earnings, driven by higher-than-expected Capex guidance that concerned investors.
• We believe the overreaction was unjustified after putting in perspective a mild increase of just $10 million per year of Capex.
• The current low equity valuation provides a margin of safety, and a fair value for the stock is estimated to be around $37 per share, with a 30% upside potential.

We first covered Iridium (IRDM) in July 2023, reporting that while the company had a high-quality business model and great visibility over its results, it was rather expensive. Since the article, which mentioned a target of $40 per share to justify an investment, the stock dropped some 45% to $28 per share....

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