3 Stocks to Watch From the Satellite and Communication Industry

The Zacks Satellite and Communication industry faces significant macroeconomic headwinds, including tariffs, inflation, high capital expenditure, and extended return-on-investment cycles, contributing to its low Zacks Industry Rank #173 and a negative earnings outlook for 2025. However, the sector is also experiencing a transformative phase driven by technological advancements like LEO constellations and increasing government and defense spending. Despite the challenging fundamental outlook, the industry has remarkably outperformed the S&P 500 and the broader tech sector over the past year, gaining 39.9%. Companies like Iridium Communications (IRDM), Globalstar (GSAT), and Gilat Satellite Networks (GILT) are pursuing growth through diverse strategies, such as government contracts and service revenue expansion for Iridium (despite a lowered 2025 service revenue guidance to 3-5%), Globalstar's IoT and ground infrastructure build-out, and Gilat's defense and in-flight connectivity segments, demonstrating resilience and specific opportunities within a complex market.

Analysis

The satellite and communication industry presents a dichotomous investment landscape, marked by significant macroeconomic headwinds yet propelled by powerful secular growth trends. On one hand, the sector faces challenges from inflation, tariffs, and supply chain disruptions, contributing to a bleak near-term outlook as evidenced by its Zacks Industry Rank of #173 (bottom 29%) and a deteriorating 2025 aggregate earnings estimate, which has widened to a loss of $1.50 per share. On the other hand, the industry has delivered a remarkable 39.9% return over the past year, substantially outperforming the S&P 500's 17.3% gain. This performance is fueled by transformative drivers such as the rollout of LEO constellations, surging demand for global connectivity, and robust government and defense spending. The industry's valuation reflects this optimism, with a trailing EV/EBITDA of 19.52X, above both the market and its own historical median. This divergence is visible at the company level: Iridium Communications (IRDM) saw its stock fall 9.3% after lowering its 2025 service revenue growth guidance to 3-5%, despite an 8% YoY increase in quarterly revenue. Conversely, Globalstar (GSAT) and Gilat Satellite Networks (GILT) have shown resilience by reaffirming their 2025 revenue and EBITDA guidance, with Gilat securing $27 million in new orders, leading to stock gains of 4.4% and 11.7% respectively.

Key Decisions for Investors

• Given the weak aggregate industry rank, investors should prioritize companies with specific, defensible growth catalysts, such as strong government order books or leadership in high-demand niches like in-flight connectivity, as demonstrated by Gilat and Globalstar.
• The significant divergence between the industry's poor fundamental outlook and its strong 39.9% stock performance highlights a market driven by future growth narratives; therefore, investors must closely monitor corporate guidance, as any negative revision, like Iridium's, could disproportionately impact stock prices.
• With the industry's EV/EBITDA multiple of 19.52X trading well above its historical median, investors should be cautious of the high expectations already priced in and scrutinize whether individual company execution can justify these premium valuations amid persistent macroeconomic risks.
• A selective approach is warranted over a broad industry bet, potentially favoring firms like Gilat (GILT) and Globalstar (GSAT) which have reaffirmed guidance, while exercising caution with names like Iridium (IRDM) that have recently shown forecast vulnerability.