What Makes Iridium (IRDM) a Promising Investment Option Now?

Zacks Equity Research

Earnings estimate for Iridium Communications Inc.'s IRDM current fiscal has moved up 22.6% in the past 90 days while that for the next fiscal increased 17.1% in the past year, implying robust inherent growth potential. Despite market volatility, this Zacks Rank #2 (Buy) stock appears to be a solid investment option for investors at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Growth Drivers

Iridium operates the world’s largest commercial constellation with a mesh architecture of 66 operational Low-Earth Orbit satellites to route traffic using radio frequency crosslinks. The inimitable architecture provides impeccable performance by minimizing the need for ground facilities, thereby expanding the global footprint of its services. The company’s next-gen satellite constellation, Iridium NEXT, enables higher speed for new products and provides service continuity with diverse global broadband offering, a unique trait that is likely to come handy with data traffic upsurge amid the coronavirus pandemic.

Being the sole provider of mobile voice and data satellite communications network, Iridium benefits from a highly lucrative recurring service revenue base. The company has witnessed a steady subscriber growth and mobile penetration backed by an efficient operating model. It is focused on augmenting both commercial and government service revenues in order to leverage its fixed-cost infrastructure.

Iridium topped earnings estimates in each of the trailing four quarters, the average positive surprise being 14.1%. The mobile and satellite communications services provider’s commercial business is considered as the primary driver of long-term growth. It serves a diversified customer base and sectors such as maritime, aviation, government, utilities, oil and gas, mining, heavy equipment, construction and transportation with its unique L-band satellite network. The commercial services form an essential component of its communications and business infrastructure, representing 63.8% of its total revenues during the last reported quarter. Also, the company registered 1,300,000 billable subscribers compared with 1,121,000 in the year-ago quarter, backed by growth in commercial IoT and government customers during fourth-quarter 2019.

Iridium remains focused on expanding the target markets through the development of new products and services. The company believes in the philosophy of delivering cost-effective and competitive broadband services through its highly-lauded Iridium Certus technology. The technology delivers a wide array of services, ranging from voice to a high-throughput L-band data connection to meet burgeoning demand. The satellite communications company has also teamed up with Amazon Web Services, the cloud computing platform of Amazon.com, Inc. AMZN, to create a cloud-based solution dubbed Iridium CloudConnect to bolster global coverage for IoT applications. All these factors augur well for its long-term growth.

Other Key Picks

Some other top-ranked stocks in the industry are Maxar Technologies Ltd. MAXR and ORBCOMM Inc. ORBC, both carrying a Zacks Rank #2.

Maxar delivered a positive earnings surprise of 82.9%, on average, in the trailing four quarters.

ORBCOMM delivered a positive earnings surprise of 5.8%, on average, in the trailing four quarters.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
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