Why Viasat Stock Went to the Moon Today
Key Points
U.S. Space Force hired Viasat to build a new type of "mini-GEO" communications satellite.
Intelsat also won an award; both contacts combined are worth $437.7 million.
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Viasat (NASDAQ: VSAT) stock soared to close up 18.2% Thursday after announcing the U.S. Space Force has awarded it a contract for "a mini-GEO dual X/Ka-band satellite system" -- which is to say a small communications satellite prototype that will operate in geosynchronous orbit more than 22,000 miles from Earth.
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Viasat plus one
Viasat describes this as the first of a series of awards to build a "proliferated fleet of small, maneuverable geosynchronous Earth orbit (GEO) satellites under the Protected Tactical SATCOM-Global (PTS-G) program." This first award of the series is called the "PTS-G Swarm 1 Delivery Order."
But it's not the only delivery order.
As Space Force advised in a separate news release, it actually issued two awards, one to Viasat and one to Intelsat, to build one satellite each. (Apparently, two satellites now constitutes a "swarm.") Space Force did not specify how much money each contractor will receive for its work, but noted that the total value of the two contracts is $437.7 million -- so probably about $219 million each.
What it means for Viasat
This is a significant win for Viasat. $219 million would equate to about 4.7% of the company's trailing-12-month sales of $4.6 billion. Should the series expand, and Viasat receive follow-on orders for Swarm satellites, well, Viasat notes that the ceiling value on the PTS-G program is $4 billion. Were Viasat to win 50% of all awards that issue in the future, this single contract could be worth nearly half a year's revenue to Viasat.
Granted, not all the money will come in a single year. Part of the award covers paying Viasat to operate the satellite for five years. Spread over five years, that still boosts Viasat's revenue growth rate by about 1% annually -- not bad.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
