EchoStar gets strong-buy call after SpaceX-linked slide
Raymond James says EchoStar’s recent drop may have run its course as investors reassess its SpaceX stake and spectrum deals.
By Sal Moretti · Money Reporter
3 min read
EchoStar has taken a 20% hit since SpaceX’s June 12 market debut, but Raymond James analysts now say the selloff may have gone far enough.
Analysts led by Brent Penter upgraded EchoStar to strong buy on Friday and set a $115 price target, according to MarketWatch. That target would be about 25% above where the shares were trading at the time of the call.
The setup is unusual. EchoStar, best known as the company behind Boost Mobile, Dish DBS and Hughes, became a favorite shortcut for investors looking for cheaper exposure to SpaceX after striking deals tied to spectrum rights.
EchoStar’s stock jumped late last year after the company agreed to sell spectrum rights worth billions of dollars to AT&T and then SpaceX. Under the SpaceX arrangement, EchoStar is set to receive common shares in Elon Musk’s rocket and satellite company.
That SpaceX stake was valued at $34.4 billion as of Thursday, MarketWatch reported.
Why analysts think the pressure may ease
Raymond James said much of the recent drag on EchoStar may now be behind it. Penter’s team pointed to short interest that has built up since the SpaceX deal was announced last September, saying some private SpaceX investors may have used EchoStar shares as a hedge.
Penter said short interest could fall as more insider shares come out of lockup next month. He wrote that if even a small group of SpaceX investors used EchoStar to hedge, the unwind could have an outsized positive effect on EchoStar’s stock, according to MarketWatch.
The Raymond James analysts also said EchoStar’s discount should shrink either way, while noting that the stock remains exposed to moves in SpaceX trading.
EchoStar’s business is also going through real turbulence. Dish DBS filed for Chapter 11 bankruptcy protection on June 30, and Raymond James said it would not be surprised if Hughes took the same step.
Hamid Akhaven, CEO of Hughes and EchoStar Capital, resigned last week, according to a securities filing cited by MarketWatch. EchoStar Capital is also being folded into another part of the company, a move Penter said raises questions.
Deutsche Bank floats another angle
Deutsche Bank analyst Bryan Kraft, who is bullish on both EchoStar and SpaceX, said recent company announcements suggest EchoStar is not planning a wide-ranging investment strategy.
Kraft said EchoStar’s focus should be cutting the tax burden from the SpaceX transaction. He also raised the possibility of a merger, saying SpaceX could effectively buy back its own shares at a discount while using fully valued stock, according to MarketWatch.
Kraft said such a structure could allow taxes to be deferred on what he described as $46 billion in proceeds from SpaceX.
SpaceX shares have also been under pressure. The stock traded as low as $122.12 on Friday, a new intraday low and below its $135 IPO price, according to MarketWatch. Dow Jones Market Data said SpaceX’s market value has fallen by more than $1 trillion from its June 16 record close.
The company also delayed its latest Starship rocket test, originally set for Thursday, citing engine problems. SpaceX said it would try the mission as early as Monday.
Greg Pendy of Clear Street Research told MarketWatch that launch delays are common in the space business, but said investors were a bit on edge after a difficult Blue Origin episode earlier this year.
This story draws on original reporting from MarketWatch.