MDA Space Ltd MDALF

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David Fawcett, MA, CFADavid Fawcett, MA, CFA • 2nd • 2nd Founder of Epic Capital ManagementFounder of Epic Capital Management 5d •

5 days ago

 

 

 

MDA: Massive Call Optionality with Apple Orders… for Free!

Apple has only dipped its toe in the direct-to-device satellite market so far, but as the sector heats up, it’s hard to imagine they won’t make a significant move soon. If they do, MDA could be a big winner.

Currently, Apple uses Globalstar’s existing satellite constellation to provide SOS and messaging services on its latest iPhones. Apple is also in the process of building 17 new satellites, with MDA as the prime contractor. A recent SpaceNews article revealed that Globalstar has secured permission to deploy up to 17 new direct-to-smartphone satellites starting next year. These satellites, managed by Globalstar on behalf of Apple, were authorized by the Federal Communications Commission on August 16, along with an extension of Globalstar’s operating license until 2039.

While Apple has only begun to explore the satellite and direct-to-device market, it’s reasonable to assume they have much more ambitious plans behind the scenes. One significant indicator is that while Apple is currently building 17 satellites, they have registered for a potential fleet of 3,000. This suggests that Apple may be gearing up for a major expansion in the satellite space.

It’s also unlikely that Apple will allow its competitors to dominate this market. As the space race intensifies, companies like SpaceX, Amazon, and AST Spacemobile are advancing their own bold strategies. SpaceX, led by Elon Musk, already has over 6,000 Starlink satellites in orbit, with plans to expand to 42,000. They’re currently testing a direct-to-smartphone constellation as part of the Starlink broadband network. Amazon’s Project Kuiper is also making significant progress, aiming to launch a constellation of more than 3,000 satellites in LEO to enhance global broadband access. Meanwhile, AST Spacemobile, backed by heavyweights like Google, AT&T, Vodafone, and Verizon, is focused on extending satellite services to remote areas, complementing terrestrial networks. Verizon recently announced a $100 million investment in AST Spacemobile, which plans to launch its first five commercial satellites this September.

Given these developments, we believe Apple will eventually go well beyond its initial foray into the direct-to-device satellite market. As Apple’s current prime contractor, MDA stands to be a major beneficiary of this potential expansion. With MDA ramping up its production capacity to 400 satellites per year by 2026, the company is well-positioned to capitalize on any large-scale satellite initiatives Apple may undertake.

Despite our optimism, it’s not certain that Apple will roll out a meaningful build-out of satellites or that MDA will remain the prime contractor. However, with 3,000 satellites registered and at a price of $10 to $20 million per satellite, the potential for MDA is obviously huge. With shares only trading at 8x EV/EBITDA next year, it appears the potential opportunity is not yet priced into the stock.

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