Shares of satellite communications skyrocketed Monday after comments surfaced over the weekend that Apple Inc.’s next iPhone. (AAPL) will provide low-Earth orbit (LEO) satellite communications, allowing users to make calls and send messages without 4G or 5G cellular service.
Key learning points
- TF International Securities analyst Ming-Chi Kuo believes Apple will partner with Globalstar (GSAT) to integrate satellite services into its next iPhone.
- Globalstar shares have resumed their longer-term upward trend, rising to their highest close since Feb. 17.
- Iridium (IRDM) stocks broke above the crucial overhead resistance at $43 on above-average volume, opening the door for additional short-term gains.
According to Mac and Apple-related news website MacRumors, TF International Securities analyst Ming-Chi Kuo told investors he believes Apple’s iPhone 13 will use a QUALCOMM Incorporated (QCOM) chip to enable LEO satellite communications. There is mounting speculation that the $2.5 trillion tech giant will integrate satellite services into its devices after CEO Tim Cook reportedly prioritized the project in 2019.
Shares in Globalstar, Inc. (GSAT), which the article reported is likely to partner with Apple, and Iridium Communications Inc. (IRDM) posted gains of 64.34% and 15.41% respectively after Kuo’s comments yesterday. Both companies operate more than 100 satellites in LEO. Below we take a closer look at each stock and turn to the charts to point out potential trading activity.
Global Star, Inc. (GSAT)
Globalstar owns satellite assets and provides its customers with communication services such as two-way voice and data transmission. Earlier this year, the Louisiana-based company signed a commercial deal with Ceres Tag to provide satellite services to the livestock industry through a smart ear tag for animal-specific activity monitoring. In June, B. Riley started covering the stock with a buy rating and a price target of $3.25. Analyst Mike Crawford said the company appeared undervalued by the market given recent comments about finally seeing returns on satellite system and spectrum assets. Through Monday’s close, the stock is trading nearly 600% higher so far, but 38% lower than B. Riley’s $3.25 target.
After slowly returning to the rising 200-day simple moving average (SMA) over the past two months, Globalstar stocks are resuming their longer-term upward trend, rocketing to their highest close since Feb. 17. In addition, heavy volume accompanied the move, increasing the likelihood of follow-up purchases in the coming days. Those looking to capitalize on the stock’s bullish momentum should take gains on a retest of significant multi-year resistance around $4.45. Guard against a sudden price reversal by placing a stop-loss order below yesterday’s low of $1.94.
Resistance, or a resistance level, is the level at which an asset’s price comes under pressure on its way up due to the emergence of a growing number of sellers willing to sell at that price.
Iridium Communications Inc. (IRDM)
Iridium Communications provides mobile voice and data communications services through LEOs to businesses, governments and consumers. After a seven-year contract signed with the U.S. Department of Defense in 2019, the company announced in June that the U.S. military had awarded it a research and development contract worth up to $30 million to develop a payload that will hosted on satellites that support navigation systems for Global Positioning System (GPS) and GPS-rejected precision systems. Last month, Morgan Stanley (MS) analyst Landon Park began coverage of Iridium stocks with an “overweight” rating and a price target of $50. Park sees the company’s service revenue grow 10% through 2023, driven by product launches, significant market share opportunities and secular tailwinds in internet of things (IoT) solutions. He also noted that free cash flow will support nearly $2 billion in share buybacks by 2025.
Iridium stocks broke above crucial overhead resistance at $43 on above-average volume Monday, opening the door for additional short-term gains. Active traders buying here should consider placing a take profit order near the all-time high of $54.50, stopping below Monday’s session low at $43.20. This provides a favorable risk/reward ratio of just over 1:2, assuming a fill at yesterday’s closing price of $46.88 ($3.69 risk per share versus $7.62 reward per share).
The risk/reward ratio highlights the potential reward investors can earn for every dollar they risk on an investment. Many investors use risk-reward ratios to compare the expected return of an investment with the amount of risk they must take to achieve that return.
Disclosure: The author held no positions in the above securities at the time of publication.