Eutelsat, the French satellite operator, has experienced remarkable stock gains following the announcement of rising military spending and shifting geopolitical tensions between the United States and Europe. After beginning the year with marked challenges—including the release of disappointing financial results—Eutelsat's stock surged significantly, with increases of over 68% on March 3 and soaring by 84.82% to reach 3.726 euros on March 4.
This drastic turn of events has not only impacted Eutelsat but also its competitor SES, which saw its share price increase by 15.45% to 4.976 euros during the same period. Analysts attribute this stock market frenzy to the growing demand for secure satellite communication services, primarily driven by the military sector.
According to Stéphane Beyazian, an analyst at Oddo, the current political climate highlights significant risks for Elon Musk's Starlink, primarily because of increasing tensions between the US and Europe. Beyazian stated, "The recent tensions between the United States and Europe, which could lead to increased defense spending on the Old Continent, jeopardize the sales prospects of Starlink in Europe. Eutelsat's OneWeb constellation, being the only other viable option for low Earth orbit, stands to benefit greatly from this geopolitical shift."
The heightened interest surrounding Eutelsat coincides with reports of the US suspending military aid deliveries to Ukraine. This action raises concerns over Ukraine’s army's access to Starlink and opens up opportunities for Eutelsat and its OneWeb services to step in as viable alternatives. This was echoed by Aleksander Peterc, analyst at Bernstein, who noted, "The recent flow of information on the need for Europe to rearm and rely on its own resources—including satellite connectivity—means Eutelsat’s LEO constellation (OneWeb) will be extremely important moving forward, especially for Ukraine, which is reliant on Starlink."
This perspective has painted Eutelsat as increasingly valuable, with its market capitalization rising from 569 million euros to over 1.75 billion euros within days of positive stock performance. Merging sentiments of optimism about increased defense budgets and the dependencies created by the shifting military strategies within Europe have amplified investor confidence toward Eutelsat and its prospects.
Investor excitement is not isolated to Eutelsat. Other stocks associated with the defense sector have mirrored this trend; notable rises were observed for companies such as Thales and Dassault Aviation, which climbed by 16%, along with Rheinmetall and Saab, which saw increases of over 15% and 11%, respectively.
Antoine Lebourgeois, another analyst, emphasized the greater narrative at play, stating, "This surge likely reflects optimism about the increase in demand from governments and military agencies across Europe for OneWeb satellite services to replace Starlink. Given Eutelsat’s reduced valuation, following approximately 80% decline over the past three years, the current volatility could signal exciting prospects for investors."
Significantly, Eutelsat has committed to bolstering Europe’s autonomy concerning space connectivity. A spokesperson for the company stated, "We have deployed and continue to operate hundreds of terminals throughout Ukraine and the Black Sea, reinforcing Europe's commitment to Ukraine’s digital resilience." This reaction exemplifies the company's proactive stance to maintain connectivity amid military challenges.
Despite the positive outlook, Eutelsat remains cautious, acknowledging past financial struggles, including the recent turbulence surrounding executive changes within the company, including the departure of its chairman. The stock’s significant upward trend also reflects market responses to recent performance challenges.
The push for alternative satellite solutions for Ukraine has sparked discussion within the European Union, as highlighted by Christophe Grudler, who recently encouraged EU initiatives to explore alternatives to Starlink. This move indicates the urgency for Europe to diversify its communications infrastructure to maintain strategic autonomy and security, especially amid the backdrop of continued conflict and geopolitical pressures.
With analysts cautiously optimistic, Eutelsat finds itself at the focal point of discussions around digital security and military connectivity. With rising military investments indicated as a driving force behind this commercial interest, stakeholders are now more aware of the importance of secure and reliable satellite communications.