Why Globalstar stock popped today, then fell | The variegated fool

What happened

Satellite communications warehouse Globalstar (NYSEMKT: GSAT) exploded higher in morning trading on Wednesday, rising nearly 20% before enthusiasm went. Pr. 11:35 AM EST, Globalstar’s winnings have been paired to just 2.5%.

So who was right? The people who bought Globalstar handed over their fists early this morning, or those who have thoughts of? Let’s take a quick look at the news that catalyzed the rally and find out.

Whiteboard drawing of stock chart arrow going up gets deleted and points back down

Image source: Getty Images.

So what

This morning, Globalstar announced that it has formed a “global strategic alliance” with wireless technology company XCOM Labs, which aims to “commercialize XCOM’s capacity multiplier technology with Globalstar’s Band n53 for close 5G implementations in the US and other countries.” The goal of this alliance is in a nutshell to use XCOM’s technology to increase the capabilities of Globalstar’s n53 spectrum by as much as “4x.” If the spectrum can carry more traffic, one thinks, it will become more valuable for 5G ISPs.

What now

All of this, of course, sounds good in theory. What is missing are some details on how much more valuable the spectrum will be in dollars and cents, or any estimate of how much more revenue (and profit) this could mean for Globalstar.

Of course, Globalstar lost money for three years in a row before finally becoming profitable in 2019 – just in time to resume losing money again in 2020. As analysts continued to predict substantially stagnant revenue at least in 2022, and net losses only rose, reliable, measurable growth is what this stock really needs right now – and today’s PR does not quite provide it.

This article represents the opinion of the author (s) who may disagree with the “official” recommendation position for a Motley Fool premium advisory service. We are motley! Questioning an investment dissertation – even one of our own – helps all of us think critically about investing and make decisions that help us become smarter, happier and richer.

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