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Why ViaSat Stock Dropped After Earnings
Key Points
ViaSat beat on earnings but missed on revenue last night.
Earnings were only positive when viewed "non-GAAP." Actual GAAP profits showed a big net loss.
Satellite communications company ViaSat (NASDAQ: VSAT) stock tumbled 4.5% through 2 p.m. ET Wednesday after reporting mixed earnings last night.
As TheFly.com reports, ViaSat's fiscal Q1 2027 earnings of $0.17 per share (non-GAAP) were nearly twice the $0.09 per share that analysts expected; however, the company's revenue fell just short of the predicted $1.2 billion.
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ViaSat Q1 earnings by the numbers
Despite the apparent earnings beat, however, not all ViaSat's news was good. Earnings calculated under generally accepted accounting principles (GAAP) were negative $52 million -- better than last year's $56 million loss, but still a loss. Sales declined 1% year over year at ViaSat, with communications services revenue flat and defense revenue declining 4%.
But not all the news was bad either. Free cash flow at ViaSat, for example, was positive despite the GAAP loss, with ViaSat generating cash profits of $72 million, a 19% year-over-year increase. ViaSat also took in $1.3 billion in new orders during the quarter, more than it recorded as sales going out the door -- and resulting in a positive book-to-bill ratio of 1.08 that implies sales growth will resume in the near future.
What's next for ViaSat stock?
ViaSat noted that over the last 12 months, its total free cash flow generated is $189 million, so the jump to $72 million is significant. Still, even assuming ViaSat can maintain this level of quarterly cash generation going forward, at its current $11.1 billion market capitalization, ViaSat stock trades at nearly 59 times FCF -- and that's before accounting for its $5.2 billion in net debt. Counting that, the company's enterprise value would be closer to 86 times FCF, which seems expensive to me.
At this price, I fear ViaSat stock looks more like a sell than a buy.
Yesterday, 4:26 PM
Reports Q1 revenue $1.16B, consensus $1.2B.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.