Pull Back continuation trade on ViaSat (VSAT)Have a long term view on this company that it will ultimately go out of business.
1. Satellite companies require multiple revenue streams to survive - typically, a combination of some/all of: maritime, gov’t, aviation, consumer mobile sat and/or fixed residential broadband.
2. Residential satellite for 12-25 Mbps @ $50/mo WAS a good business prior to LTE, federal landline and internet subsidies and cable expansion. Now competitors cover 99%+ of the US population with 2X the speed and a total cost close to half.
3. Residential subscribers are the bulk (70%) of ViaSat’s forward valuation - this is major Achilles heal
4. Government and aviation are decent business lines but collectively are only <30% of EBITDA
5. ViaSat-2 ($600M) was launched on June 1, six months late and has significantly less capacity then originally stated. It cannot possibly provide enough subscriber capacity to support the business.
6. ViaSat-3 ($650M+) is a trio of future satellites that will dig the capital hole deeper.
7. Current financial metrics are highly manipulated and will be forced inline as performance and new mandatory accounting standards (ASC 606) are enacted. Key reporting metrics, like churn, are currently not provided - unimaginable for a reporting public company in the telecom subscription business, there’s a LOT more, but you get the idea.
Buy side analysis have it completely wrong, projecting high subscribers and increased revenue per user. They are way off.
Technically, this stock is at perfect entry point for the continuation trade on the larger time frame. Broke down from a LT sideways balance and now retraced to the breakdown area.
