EchoStar is worth at least $161 a share because of SpaceX stake, says analyst
The SpaceX IPO has made EchoStar a more valuable company, according to New Street Research, which raised its price target on the satellite company to reflect its stake in the Elon Musk -run company. Analyst David Barden said Monday EchoStar is worth $159 per share based purely on the value of SpaceX’s stock at the end of its first day of trading. However, New Street has a price target at $165 for SpaceX shares, which puts the potential value of EchoStar at $161 per share, or 37% above where its shares closed Monday. “We believe owning SpaceX stock via EchoStar at these levels is an attractive proposition,” Barden wrote in a note to clients. The current EchoStar stock price, he said, implies that the company’s SpaceX stake was valued at $86 per share — 46% below SpaceX’s Friday closing stock price. EchoStar is expected to receive roughly 262 million SpaceX shares. The rocket maker’s stock ended its first day of trading at about $161, which makes EchoStar’s stake is worth $42.1 billion. At an established price target of $165 for SpaceX, the stake is worth $43.2 billion, according New Street’s Space team. SpaceX shares have continued to rally since the company’s debut. In trading on Tuesday , the stock was recently up another 13%, catapulting it past New Street’s price target. EchoStar shares were up about 2% in Tuesday’s session. EchoStar operates in the telecommunications services industry and has built a substantial portfolio of spectrum licenses to provide satellite telecom services, including Dish TV, Sling TV and Boost phone services. It closed the first quarter with more than 6 million pay-TV subscribers, which included 4.8 million Dish TV subscribers and 1.79 million Sling TV subscribers. The analyst said he is keeping a close watch on the Federal Communications Commission’s designated entity spectrum auction to update the value for the paired AWS-3 auction. In New Street’s latest assessment of EchoStar, it reduced the value of its AWS-3 spectrum to $3.00 per MHz-POP from $3.62, which lowered the company’s estimated value to $8.3 billion from $10 billion. The dip is partly due to the expected trajectory of the ongoing spectrum auction, according to the note. New Street also noted that it previously used a 10% holding company discount, but has now revised that to a 20% discount to accommodate investors’ expectations around the uncertainty of when Charlie Ergen, the co-founder of EchoStar, decides to invest resources in the future. It is unknown how long Ergen plans to hold on to the stake in SpaceX. EchoStar recently received FCC approval for the $40 billion sale of wireless spectrum to AT & T and SpaceX. The approval came ahead of SpaceX’s historic IPO , which will now influence EchoStar’s valuation.
