Goldman Sachs downgrades Inmarsat to 'neutral', slashes price target

Goldman Sachs has downgraded its stance on Inmarsat to ‘neutral’ from ‘buy’ and slashed the price target to 580p from 860p.

It noted that since being added to the Buy List in August 2016, the stock is down around 43% versus the FTSE World Europe up around 15%, driven by earnings downgrades as aero costs increased and revenue headwinds persisted.

The bank pointed out that Inmarsat is facing higher costs associated with building out its inflight connectivity business - now 1300 planes contracted - limited recovery in maritime and legacy declines.

“We continue to view the stock as a longer-term growth story given its exposure to growing segments in the satellite industry (aero, government and maritime).

“However, with capex remaining elevated through to 2020E as ISAT refreshes its satellite fleet, we expect limited free cash flow generation to continue to leave the dividend uncovered.”

Goldman said it expects increasing supply of satellite capacity to remain a key investor concern at least until ISAT is able to show evidence of its aero capabilities as the service comes online (late 2018), with associated revenues/profitability.

At 1200 GMT, the shares were down 5.9% to 457.26p.