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On Monday, Goldman Sachs analyst Andrew Lee issued a downgrade for Eutelsat Communications SA (LON:0JNI) (ETL:FP) (OTC: EUTLF (OTC:EUTLF)) stock, shifting the rating from Neutral to Sell. Accompanying this downgrade, the firm also reduced the price target significantly to EUR1.00, a decrease from the previous EUR3.60. The company, currently valued at $666.1 million in market capitalization, has received a "WEAK" financial health rating according to InvestingPro analysis.
The downgrade comes as Goldman Sachs identifies several challenges facing Eutelsat, including competitive pressures, an increasing debt load of $3.47 billion, and risks associated with executing its business strategy. The stock has declined nearly 70% over the past six months, with InvestingPro data showing the RSI in oversold territory. Despite this substantial drop, Goldman Sachs anticipates further downside potential. This expectation is based on additional competitive risks that have emerged from the firm’s thematic research.
Eutelsat’s position in the satellite communications market is becoming increasingly precarious due to a surge in supply, which is leading to aggressive pricing and volume pressures for established market players. While the company maintains impressive gross profit margins of 81%, Goldman Sachs points out that Eutelsat’s opportunity to secure a crucial first-mover advantage is diminishing rapidly. This is attributed to two main factors: the strengthening of Starlink’s business-to-business (B2B) offerings and the anticipated market disruption from upcoming projects like Amazon (NASDAQ:AMZN)’s Project Kuiper and various Chinese satellite constellations. For deeper insights into Eutelsat’s competitive position and 14 additional ProTips, visit InvestingPro.
The analyst’s note specifically highlights the threat posed by these developments, suggesting that Eutelsat is not as well-equipped to navigate the evolving landscape of satellite communications. With new entrants poised to challenge the status quo, the company’s ability to maintain its competitive edge appears to be under threat.
Goldman Sachs’ revised outlook for Eutelsat reflects a broader industry trend where traditional satellite service providers are grappling with an influx of new technologies and competitors. The firm’s analysis indicates that these market dynamics are likely to have a continued impact on Eutelsat’s financial performance and stock valuation.
In other recent news, Eutelsat Communications SA has seen its stock rating upgraded from Sell to Hold by CFRA, with the price target remaining at EUR3.50. This upgrade reflects CFRA’s assessment that the market has fully accounted for Eutelsat’s structural challenges. The forward-looking consensus EV/EBITDA multiple for the fiscal year ending June 2025 is noted at 6.4 times, which is favorable compared to the company’s ten-year average of around 7 times. Despite the upgrade, CFRA’s earnings per share estimates remain unchanged, projecting -EUR0.30 for FY 25 and EUR0.01 for FY 26. Additionally, Eutelsat has exercised a put option with EQT (ST:EQTAB) Infrastructure VI fund, resulting in the creation of a new entity that will include Eutelsat’s ground infrastructure assets. This transaction is expected to provide Eutelsat with a cash influx, though CFRA does not foresee significant operational improvements as a result. These developments highlight ongoing strategic moves within the company.
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