The satellite operator's stock gained ground Sept. 8 after UBS initiated coverage with a Buy call and a $150 objective, up from $127, betting the company's coming 2 percent holding in SpaceX is worth more than the market credits. The stake follows EchoStar's roughly $43 billion sale of most of its spectrum portfolio.
EchoStar shares climbed 4.2 percent on Tuesday after UBS turned bullish on the satellite operator, arguing its pending stake in SpaceX makes the stock worth far more than its market price.
The bank resumed coverage with a Buy rating and a $150 price target, raised from $127 under its prior Neutral stance, citing EchoStar's shift from wireless operator to investment vehicle after it agreed to sell 75-80 percent of its spectrum portfolio for roughly $43 billion, UBS said in a note.
Once the transaction closes, EchoStar will hold a 2 percent stake in SpaceX equal to about 262 million shares, giving the company a direct claim on the world's most valuable private space venture. The new target implies roughly 60 percent upside from EchoStar's $93.45 close on Tuesday.
The re-rating puts UBS at the high end of Wall Street, where the average target across six analysts stands at $128.43 with a consensus Buy rating. New Street Research holds the most bullish view at $156, while Raymond James rates the stock Strong Buy with a $103 target and Deutsche Bank and Citigroup carry Buy ratings at $118 and $117, respectively.
EchoStar shares have climbed about 9 percent over the past five sessions even as the stock remains down roughly 14 percent for the year. The spectrum sale, announced last September alongside the SpaceX stake, has recast the company from a declining pay-TV and wireless operator into a holding company whose value increasingly hinges on its position in SpaceX, the launch and satellite broadband provider led by Elon Musk.
The thesis rests on a discount-to-net-asset-value trade: UBS contends the market has yet to price EchoStar's holdings at their intrinsic worth, a gap that typically narrows once a company's asset base becomes transparent to investors. The bank's view stands apart from the operational concerns that have weighed on the stock, including the decline of its legacy Dish pay-TV subscriber base and the capital demands of its wireless buildout.
Investors will watch for the closing of the spectrum transaction, which determines when EchoStar books the SpaceX stake and begins trading on its asset value. A completed deal could draw value investors seeking to capture the gap between the stock price and the implied worth of its holdings, with the company's next earnings report offering an early read on deal timing.
This article is for informational purposes only and does not constitute investment advice.
