COM DEV is returning to its former glory, says Paradigm

The emergence of satellite as a platform to deliver global broadband connectivity has put COM DEV (COM DEV Stock Quote, Chart, News: TSX:CDV) in a perfect position to capture part of an “exploding market”, says Paradigm Capital analyst Daniel Kim.

In a research update to clients this morning, Kim reiterated his “Buy” recommendation and $7.00 on year target on COM DEV, implying a return of 82% at the time of publication.

Kim notes that for years the amount of satellites launched, globally, has flatlined. But with those numbers set to spike COM DEV, which is a leading supplier of satellite communications equipment, is set to be a major benefactor.

“The satellite industry has taken centre stage as the world’s best technology platform to deliver global broadband connectivity to every corner of the world. The current global constellation of communication satellites numbers in the hundreds with ~20–30 new satellite launches per year,” says Kim. “For as long as we have followed COM DEV, that number of annual launches has remained fairly steady, as has its dominating market share. However, a sea change is coming.”

Kim notes that just two years ago there were under 300 commercial communications satellites in orbit. He points out that the number has jumped to more than 433 today. But factor in all the projects that have been announced and the number leaps to more than 4000, he says.

The analyst says groups like O3b, which has secured (U.S.) $1.3-billion in capital, Elon Musk’s SpaceX, and the U.K.-based Global Xpress, are disruptors who are ushering in a new era in satellite communications that will make bandwidth “more affordable, wider” and able to provide “much higher spectral efficiency”.

“What was once a staid, low-growth business we believe will jump into hyper-drive in the coming years and will likely remain so for decades to come,” says Kim.