Investors in Eutelsat Communications SA are beginning to show caution following an extraordinary surge in the stock price that saw shares rise nearly 300% during March 2025. This remarkable increase follows three years of continuous decline for the company, driven in part by geopolitical shifts and Europe's urgent need for alternatives to Elon Musk's Starlink satellite internet service.
In the first three days of March, Eutelsat's stock skyrocketed by 554%. However, as excitement has dulled, investors are now concerned. They are particularly awaiting clarity on how much financial support the French satellite operator can expect from the European Union, which is increasing defense-related spending.
Analysts assert that while Eutelsat is well-positioned to benefit from these geopolitical maneuvers—especially Europe's ambition to establish a domestic satellite champion—the extent of financial assistance crucial to Eutelsat’s future remains uncertain. “We currently have no visibility on what form that support will take,” cautioned New Street Research analyst Ben Rickett. He added, “The current market value implies a very generous deal with the EU.”
Eutelsat's resurgence in the stock market is noteworthy, especially given that the company’s share price has more than doubled this year after years of declining performance, primarily due to competition from rivals like Starlink. Indeed, Starlink has a significant advantage; its satellites are positioned much closer to Earth, allowing faster signal transmission.
In 2023, Eutelsat acquired UK-based competitor OneWeb, which enabled it to establish a network of low-earth-orbit satellites. This strategic move was essential for the company to remain competitive, although its current constellation remains considerably smaller—10 times less than Starlink's fleet. The competitive landscape is poised to intensify further with Amazon preparing to launch its satellite broadband network within the year.
Amid this frantic growth and competitive landscape, Eutelsat faces significant financial challenges. The company must repay €2.4 billion (approximately $2.6 billion) in debt over the next four years and has committed to investing about €2 billion in a European initiative aimed at developing a sovereign satellite communications network. This investment poses additional strain on Eutelsat’s cash flow as it juggles its debt obligations with the necessity to invest in new technologies.
Morgan Stanley analysts, including Terence Tsui, have pointed out that despite the impressive share price growth, Eutelsat’s near-term fundamentals have not significantly improved. Their projections suggest that free cash flow will remain negative until 2027, indicating ongoing financial pressure. This situation raises concerns about potential share volatility—exacerbated by the fact that around 25% of the free float shares are held by short sellers. According to data from S3 Partners, Eutelsat is currently one of Europe’s most expensive stocks to borrow against.
Many analysts still believe Eutelsat will receive state support, especially given that approximately 25% of its shares are owned by entities linked to the French and UK governments. Furthermore, the company may play an essential role in the upcoming military intelligence satellite network that the EU plans as part of its endeavor to reduce reliance on American satellite technology. Additionally, Eutelsat has pitched its services as a credible alternative to Starlink in Ukraine, which could further influence its strategic partnerships.
However, speculation arises concerning how much Eutelsat stock can further rise. Goldman Sachs Group Inc. estimates that if the company secures 2.5% of the EU's €150 billion defense spending budget, its shares could reach €6.70, representing a 36% increase from its closing price this past Wednesday. Still, they caution that uncertainties abound and a myriad of outcomes is possible.
Bernstein analyst Aleksander Peterc echoed this sentiment, emphasizing Eutelsat's “absolutely strategic importance” to Europe. Still, he remarked, “It’s hard to say right now what’s the economic reality and how much the stock is really worth without knowing the extent of financial assistance.” He noted the influence of significant short positions on the stock could impact its value moving forward.
In summary, Eutelsat's meteoric rise raises essential questions about its future. As the company continues to navigate complex financial waters amid structural competition, the response from the European Union in providing support will likely play a pivotal role in determining not only the stock's immediate trajectory but also the company’s longer-term sustainability in the ever-evolving satellite communications space.
