Inmarsat rallies on Barclays upgrade

Satellite company Inmarsat rallied on Monday as Barclays upgraded the stock to ‘equalweight’ from ‘underweight’ and lifted the price target by to 860p from 745p.

“Following the stock’s correction year-to-date (down 33% versus the Stoxx Europe 600 telecoms index down 13%), the risk/reward now appears balanced. However given high execution risk, rising competition and a valuation that still factors in sustained growth acceleration, we only upgrade to EW.”

The bank said Inmarsat’s third-quarter results were better than expected, mostly as GX started to deliver. Barclays said group revenue was 2% ahead of expectations, while earnings before interest, taxes, depreciation and amortisation were 8% higher.

However, net income was below Barclays’ expectations due to a one-off cost linked to a convertible issuance and early repurchase.

It pointed to the announcement of new contracts with IAG and Air New Zealand, which it said provide some “long-awaited” visibility for revenue growth in 2017-18.

However, Barclays noted the maritime division remains depressed and ISAT indicated a fast ramp-up in aero division costs ahead.

At 0843 GMT, the shares were up 2.4% to 785.50p.