ViaSat, Inc.

VSAT Details

ViaSat, Inc. (NASDAQ: VSAT) is engaged in the provision of broadband technologies and services. Its operating segments are 1) Satellite, which provides satellite-based highspeed broadband products and services to residential customers, enterprises, commercial airlines, etc.; 2) Commercial Networks, which develops satellite and wireless broadband platforms, networking equipment and advanced microwave solutions; and 3) Government Systems, which offers worldwide mobile broadband services to militaries and governments. As of August 26, 2021, VSAT's market capitalization stood at USD 3.79 billion.

Strategic Collaboration: On August 19, 2021, VSAT announced a partnership with Telefónica Global Solutions (TEF), a subsidiary of Telefónica Group, to augment the availability of fast and reliable satellite internet services for businesses across Brazil. Under the partnership, TEF, which provides high-quality connectivity and digital platforms to multinational companies, wholesale, fixed and mobile carriers, etc., has agreed to be a wholesale distributor of VSAT's high-speed satellite internet services in Brazil.

Enhancing Options for Consumers: On August 12, 2021, VSAT streamlined the process for purchasing its internet service packages for consumers and businesses by offering cash payment options across 21,000 OXXO's convenience stores spread across Mexico. As a result, users who were unable to engage in online transactions due to a lack of access to bank accounts and credit cards can now pay for VSAT's internet service with cash at participating OXXO convenience stores.

Q1FY22 Results:  The company reported YoY growth of 25.33% in revenue to USD 664.86 million in Q1FY22 (ended June 30, 2021) compared to USD 530.49 million in Q1FY21. Satellite Services, which accounted for 41.23% of the total revenue in Q1FY22, improved by 35.71% YoY. VSAT reported a net income of USD 16.97 million in Q1FY22 vs. a net loss of USD 12.39 million in Q1FY21. As of June 30, 2021, the company's balance sheet stood with cash and cash equivalents of USD 275.69 million and total debt of USD 2.14 billion.

Key Risks: In FY21, VSAT's top five largest contracts accounted for ~16% of its total revenue. In addition, revenue from the US Government (as an individual customer) represented 30% of the total FY21 revenue. Therefore, the loss of critical contracts or unfavorable changes in the relation with the US government could impair its financials. 

Outlook: As of Q1FY22, VSAT expects average YoY growth of 20% in revenue and average YoY growth in the mid-teens in adjusted EBITDA through FY23 from FY21.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

VSAT Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: VSAT's share price has declined by 2.56% in the past three months and is currently leaning towards the higher-band of its 52-week range of USD 29.82 to USD 61.35. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 50.51. We have valued the stock using the EV/EBITDA multiple-based relative valuation methodology and arrived at a target price of USD 56.44. Considering the slight correction in the stock price, strategic collaboration, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 51.68, down 1.24% as of August 26, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV. 

Strategic Education, Inc.

STRA Details

Strategic Education, Inc. (NASDAQ: STRA) is an education services holding company that provides post-secondary education and other academic programs through campus and online-based offerings to support individualized learning for students. Its operating segments are 1) US Higher Education (USHE), offering certificate and degree programs to working adults through Strayer University and Capella University, 2) Australia/New Zealand, which offers certificates and degree programs through Torrens University in Australia and Media Design School in New Zealand, and 3) Alternative Learning, which focuses on promoting and maintaining relationships with large employers to build employee education benefits programs that provide employees access to skill-based training, certificate and degree programs. As of August 26, 2021, the company’s market capitalization stood at USD 1.90 billion.

Collaboration to Upskill Raising Cane’s Workforce: On August 05, 2021, Workforce Edge, a subsidiary of STRA, collaborated with Raising Cane’s, a chicken finger brand, to provide various online undergraduate and graduate programs through a network of public and private universities to the latter’s workforce of 34,000 crewmembers. Workforce Edge’s education platform furthers the professional and personal development of the employees, thus enabling employers to retain key talent and stay competitive.

Q2FY21 Results: The company reported YoY growth of 16.94% in revenues to USD 299.17 million in Q2FY21 (ended June 30, 2021) compared to USD 255.83 million in Q2FY20, attributable to the acquisition of Australia/New Zealand operations from Laureate Education, Inc. in November 2020. Net income for Q2FY21 reduced to USD 19.98 million from USD 34.15 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents (including short-term investments) of USD 265.63 million and total debt of USD 141.75 billion.

Key Risks: As higher education providers, Strayer University and Capella University are subject to strict federal and state regulations and accrediting agencies. Higher Education Act and related regulations scrutinize all higher education providers that participate in Title IV programs. The company is mandated to comply with the comprehensive Title IV program regulatory requirements set by the Department of Education (DOE), non-observance of which could lead to the loss of program funding and could adversely impact the company’s financials.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

STRA Daily Technical Chart

Stock Recommendation: STRA’s share price has increased 1.26% in the past three months and is currently leaning towards the lower-band of the 52-week range of USD 69.25 to USD 105.85. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is 49.56. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 83.07. Considering the slight uptick in the stock price, robust balance sheet, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 75.64, down 2.0% as of August 26, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.