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Viasat Rolls Out New Internet Service Powered by ViaSat-2

Zacks Equity Research
Updated

Viasat Inc. VSAT rolled out the fastest satellite internet available in the United States, powered by the new ViaSat-2 satellite system. The company is offering streaming and download speeds of up to 100 Mbps to subscribers along with unlimited data plans for video streaming.

The service is aimed at households that are outside the reach of cable systems (10-30 million households in the United States). These consumers have limited options for high-speed Internet service, with DSL being the most common choice. However, DSL speeds typically top out at 25 megabits per second.

In essence, Viasat is offering its service as a higher-speed alternative to DSL. Viasat’s new plans start at 12 megabits per second, at an initial cost of $50 per month. Consumers can scale up to 25 megabits for $70 per month, 50 megabits for $100 per month and 100 megabits for $150 a month. Each of the plans offer unlimited data, which allows roughly 150 gigabits of video streaming and other consumption per month.

If a user exceeds the data limits and the network is crowded, they may experience slower speeds. However, Viasat insisted that it will not charge overage fees.

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The new plans are powered by ViaSat-2, a $625-million high-capacity satellite launched by the company in June 2017. The satellite also powers fast in-flight Wi-Fi for JetBlue, American Airlines, United Airlines and other commercial carriers and government customers. ViaSat-2 satellite system provides service to North America, Central America, the Caribbean and a small part of northern South America.

ViaSat-2 is expected to have twice the bandwidth and seven times more broadband coverage, and is a massive improvement over ViaSat-1. Some other features which make it more powerful than ViaSat-1 include high-capacity connectivity, smaller gateway antenna and twice as many gateways. Viasat believes that these advanced smaller gateways can help it place the latest satellites in proximity of popular Internet access points, delivering greater network reliability and security.

Viasat is already building its next-generation high-capacity satellite system — ViaSat-3 — which is expected to expand its network worldwide.

The satellite business is a burgeoning space and is one of the fastest growing segments of the $350-billion space industry. Significant demand for higher speeds of broadband connectivity in residential, in-flight and government markets are likely to accelerate Viasat’s growth momentum in the near term.

In recent quarters, Viasat’s earnings have suffered due to R&D expenses. The primary dampeners are the ViaSat-3 payload, pre-flight development and testing, commercial in-flight connectivity, STCs and line-fit activity. This indicates that we can expect more pressure on profits in the upcoming quarters. Viasat’s shares have gained just 4% in the past year, underperforming the industry’s gain of 18.2%.

Revenue growth in the fiscal third quarter was strained due to capacity constraints. Also, the costs related to the ViaSat-2 service launch activities and preparations for the large-scale in-flight Wi-Fi ramp are expected to burden the bottom line in the coming quarters. The company also predicts heavier advertising activity over the next several quarters, which will raise costs and hurt margins.

Zacks Rank & Stocks to Consider

Viasat carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the same space include HP Inc. HPQ, Motorola Solutions, Inc. MSI and Harris Corp. HRS, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

HP Inc. has a decent earnings surprise history. The company recorded an average positive surprise of 4.8% over the trailing four quarters, beating estimates thrice.

Motorola Solutions has a decent earnings surprise history for the preceding four quarters, beating estimates each time, with an average positive surprise of 11.8%.

With four back-to-back earnings beats, Harris Corp. has a striking average positive surprise of 6.7%.

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HP Inc. (HPQ) : Free Stock Analysis Report
 
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ViaSat, Inc. (VSAT) : Free Stock Analysis Report
 
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