We came across a bullish thesis on Iridium Communications Inc. (IRDM) on Stock Picker’s Corner’s Substack by Stock Picker’s Corner. In this article, we will summarize the bulls’ thesis on IRDM. Iridium Communications Inc. (IRDM)’s share was trading at $29.64 as of Oct 29th. IRDM’s trailing and forward P/E were 31.87 and 39.06 respectively according to Yahoo Finance.
A close up of a satellite in space, showing the advanced technology of communications systems.
Iridium Communications Inc. operates within the satellite communications sector, offering essential connectivity solutions through its network of satellites that utilize weather-resilient L-band frequencies. Renowned for its satellite phones, IoT terminals, and mobile connectivity services, Iridium serves various industries, including emergency response, aviation, government, and maritime. The company boasts a significant and dependable customer base, featuring major players such as Caterpillar, Honeywell, and Garmin. Recently, Iridium released a positive third-quarter report, revealing an 8% increase in revenue to $212.77 million, a 5% rise in service revenue, and an 11% growth in total billable subscribers.
Iridium’s investment thesis is supported by its strong market position, high projected growth, and recent initiatives that benefit shareholders. The satellite market is experiencing substantial growth, driven by the convergence of the AI Era and geopolitical tensions, which have increased demand for real-time data, autonomous technologies, and national defense applications. Iridium’s services are well-suited to meet these evolving needs. Projections indicate that the mobile satellite services sector could reach $9.5 billion by 2031, the military satellite market may grow to $53.85 billion by 2029, and the internet satellite market is expected to surge to $58.1 billion by 2032 due to rising connectivity demands. Furthermore, it is projected that there will be 139.33% annual earnings growth over the next five years for Iridium.
Adding to the appeal, Iridium has committed to substantial share buybacks, approving an additional $500 million for this purpose, bringing the total authorization to $1.5 billion since 2021. This move demonstrates the company’s commitment to returning value to shareholders and underscores management’s confidence in Iridium’s long-term prospects. The recent growth in satellite deployments, led by major players like SpaceX’s Starlink, reflects a broader industry trend towards expanding satellite coverage to support AI-powered devices and secure, global communications infrastructure. As geopolitical tensions rise, the demand for secure, independent communication systems also grows, with China’s aggressive expansion into satellite broadband adding urgency for alternative providers like Iridium.
With a modest dividend yield of 1.91% and significant growth potential, Iridium offers a balanced investment with both income and capital appreciation opportunities. The company’s one-year price target stands at $40.60, indicating a potential one-year gain of 36.56%, making Iridium a compelling opportunity to capitalize on a high-growth market at an attractive entry point.
The investment thesis centers on Iridium’s strong market position, driven by its dependable satellite network and diverse customer base. With robust growth prospects in the satellite communications sector, anticipated earnings growth, and significant share buybacks.
Iridium Communications Inc. (IRDM) is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held IRDM at the end of the second quarter which was 29 in the previous quarter. While we acknowledge the risk and potential of IRDM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than IRDM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.