Truist has named stocks that could benefit from the satellite boom. Should you buy them?
It's about chipmakers' papers
Among the companies that could benefit from the space race in the satellite industry are microchip makers, says analyst / Photo: Macom
Among the companies that could benefit from the space race in the satellite industry, in which, among others, SpaceX and Amazon are involved, could be microchip manufacturers, Truist Securities analyst William Stein believes, writes MarketWatch. It is their technologies that provide critical services - from satellite imagery to Internet access.
Which companies are worth looking at?
The flow of news about satellite launches and the development of network services based on low-Earth-orbit (LEO) satellites is attracting the attention of investors, says William Stein of Truist Securities. The market of semiconductors for such low-Earth-orbit (LEO-) satellites is still small and amounts to only $3.5 billion, but by 2035 it can grow almost four times, up to $13.5 billion, the analyst believes. Against this background, Truist has compiled a list of promising chip makers that could benefit from the boom in the satellite industry. Especially in this list Stein singles out the company Macom Technology Solutions. According to Truist Securities' conservative analysis, the company's sales in the LEO segment could grow from the current $36 million to $140 million by 2035, and the satellite technology market available to the company would increase by more than 360%.
Shares of Macom have risen almost 166% over the past 12 months. Mizuho analysts noted back in January that the company's securities got a boost thanks to investors looking to capitalize on the growth of the satellite market, MarketWatch notes.
Macom CEO Stephen Daly on Feb. 5, during a fiscal year-end teleconference, said there is an "incredible" amount of investment in satellite constellations for direct connectivity to smartphones and other gadgets. He emphasized that Macom is involved at some level in all existing major LEO projects and is working with several promising newcomers to the industry.
In addition to Macom, companies such as TTM Technologies, Microchip Technology and STMicroelectronics can benefit significantly from orders in the low-orbit satellite segment, according to Stein. The latter is a key supplier to Starlink SpaceX. Intel's business could also benefit - thanks to its Altera division (a maker of programmable chips), says the analyst - but because of the corporation's scale, the space sector's impact on overall performance will be negligible. The same applies to Qualcomm, Texas Instruments and AMD - their core business is too big for the satellite segment to noticeably change the overall picture, says Stein.
What about the stock
The majority of Wall Street analysts positively assess Macom shares: 12 experts advise to buy them, four more - to keep them in the portfolio, according to MarketWatch data. There are fewer opinions on TTM Technologies - only five recommendations, but all of them are unambiguous: to buy. On prospects of shares of Microchip Technology analysts also look positively: they have 20 recommendations "to buy", eight more - to keep. As for STMicroelectronics, the evaluations are more reserved: 14 analysts advise to buy the company's securities, 16 - to hold, and one - to sell.
Context
The number of satellites between 100 and 1,200 miles above the Earth should increase from the current 11,000 to about 130,000 by 2035, MarketWatch points out, citing Stein. At the same time, the numbers could be much higher: SpaceX plans to launch up to 1 million satellites designed to work as data centers, as well as up to 20,000 Starlink satellites for an indefinite period of time.
Amazon plans to put several thousand vehicles into orbit over the next decade (the Financial Times wrote in early April that Amazon was considering buying satellite operator Globalstar to speed up the creation of a full-fledged competitor to Starlink), while Jeff Bezos's Blue Origin and startup Starcloud intend to launch tens of thousands of space data centers.
According to Stein's estimates, an average satellite requires semiconductors worth about $50,000, and more complex vehicles - over $100,000. Chips are also needed for related technologies, such as user terminals, the analyst pointed out.
This article was AI-translated and verified by a human editor
