Iridium (IRDM) can show us if Elon Musk’s Starlink scheme could make money.
Iridium Communications Inc. (NASDAQ: IRDM) operates a network of 66 Low Earth Orbit (LEO) communications satellites that offer phone and digital communications everywhere on Earth. SpaceX subsidiary Starlink plans to make high-speed wireless internet available worldwide through thousands of LEO satellites.
Iridium is a good benchmark for Starlink because Iridium already offers satellite Broadband, Data, Voice, Cloud Services, L-Band Services, Internet of Things (IoT), Land Mobile phones, Maritime Communications, Military Communications, Enterprise Solutions, Government Services, and Aviation Communications.
Thus, I think Iridium already operates a global satellite wireless internet. Thus, Iridium shows Starlink is viable.
Can Disasters Boost Iridium’s Stock?
Strangely, catastrophes can boost Iridium’s business. To explain, people fearing that disasters will cut off their internet and phone service will buy Iridium products.
In particular, I think some professionals working remotely could buy Iridium (NASDAQ: IRDM) products so they can keep working and make money. Other people want to keep entertainment options such as podcasts, streaming video, and video games available in crises.
However, the coronavirus pandemic caused Iridium’s share price to fall to $17.91 on 18 March 2020. In contrast, Iridium’s shares rose to a 2020 high of $31.87 share on 12 February 2020.
Iridium rose back to $29.12 a share on 1 September 2020. Overall in 2020, Iridium went from $24.84 on 2 January 2020 to $27.86 on 6 October 2020 and $28.62 on 8 October 2020.
Will Iridium profit from Global Warming Catastrophes
I think Iridium (IRDM) could be in for a lucrative decade because the number of catastrophes is increasing.
The number of US catastrophes rose from 55 in 2018 to 61 in 2019, the Insurance Information Institute estimates. In particular, there were 49 destructive thunderstorms, 16 catastrophic winter storms, nine tropical cyclones, nine floods, and 9 wildfires hit the United States in 2019. Many of those disasters cut off internet, wireless, and phone services.
For instance, California suffered its first rolling blackouts in 19 years in August 2020, Politico reports. That could help Iridium because rolling blackouts could shut down the internet and wireless service.
I think there could be greater demand for Iridium’s services from corporations. Walmart (WMT); for instance, could use Iridium’s Cloud to connect its stores. Starlink could cash in with similar solutions.
California Burns Iridium Profits
I think demand for such connectivity will grow because Global Warming will increase the frequency of weather-related disasters, the International Monetary Fund (IMF) predicts. To explain hotter weather will lead to more hurricanes, droughts, wildfires, and other catastrophes.
California, for instance, is experiencing its worst recorded wildfire season. The Associated Press reports one blaze, the August Complex Fire, burned more land than all California fires between 1932 and 1999. The August Complex Fire is burning in the region between the San Francisco Bay Area and the Oregon state line.
Over 8,200 wildfires have burned over four million acres in California in 2020, the California Department of Forestry and Fire Protection estimates. I believe catastrophes such as the California fires will increase demand for Iridium by knocking out internet, mobile, and phone services. Fires can destroy phone lines and mobile towers, for instance.
Is Iridium Making Money?
Iridium (IRDM) makes little money. For instance, Iridium reported a quarterly operating income of $5.83 million on 30 June 2020.
The quarterly operating income fell from $11.82 million on 31 March 2020 and rose from $0 on 31 December 2019. Moreover, Iridium began 2020 with a quarterly gross profit of $104.10 million on 31 December 2020. The quarterly gross profit grew to $111.03 million on 31 March 2020 and fell to $104.97 million on 30 June 2020.
On the other hand, Iridium reported a quarterly common net loss of -$12.42 million on 30 June 2020. The quarterly common net loss fell from -$31.7 million on 31 March 2020 and -$107.86 million on 31 December 2019.
How Much Cash Does Iridium Generate?
Iridium (IRDM) generates a little more cash. Iridium reported a quarterly operating cash flow of $63.72 million on 30 June 2020. The quarterly operating cash flow rose from $40.81 million on 31 March 2020 and $55.69 million on 31 December 2019.
Iridium’s quarterly ending cash flow rose from -$143.19 million on 31 December 2019 to $67.29 million on 31 March 2020. The quarterly ending cash flow then fell to $51.83 million on 30 June 2020.
Importantly, I do not think Iridium is borrowing money. To explain, Iridium reported a -$3.06 million financing cash flow on 30 June 2020. That number fell from -$186.30 million on 31 March 2020 and -$184.60 million on 31 December 2019. The financing cash flow shows how much Iridium spends to pay debts.
Iridium’s Revenues Shrink
Hence, it looks as if Iridium is making some more money in 2020. However, Iridium’s revenues have shrunk in 2020.
Iridium’s quarterly revenues fell from $145.29 million on 31 March 2020 to $140.17 million on 30 June 2020. Moreover, Stockrow estimates Iridium’s revenue growth shrank by 2.05% in the quarter ending on 30 June 2020. In contrast, Iridium’s revenue growth grew by 8.68% in the quarter that ended on 31 March 2020.
I think Coronavirus is eating into Iridium’s revenues. My guess is some of Iridium’s aviation and commercial customers are making less money because of coronavirus.
Many airlines are still cancelling flights because of coronavirus. Air Canada and WestJet cancelled 439 flights in September 2020, the CBC estimates. Air Canada alone lost $19 million a day in 2020 and saw its revenues fall by 95%, the CBC claims.
What Value Does Iridium Have?
I think Iridium’s potential value is enormous because of its LEO satellites and communications infrastructure.
Iridium’s IoT infrastructure could be lucrative because of the growing use of drones and autonomous vehicles. Iridium’s IoT could operate a fleet of self-driving trucks, for example. Notably, Walmart (WMT) is testing autonomous Ford Transit vans operated by technology from Gatik, TechCrunch claims.
Currently, however, Iridium offers little value. For instance, Iridium (IRDM) reported $119.11 million in cash and short-term investments and total assets of $3.374 billion on 30 June 2020. However, I do not think those numbers justified the share value of $27.48 on 6 October 2020.
Why Investors Need to Examine Iridium
I regard Iridium Communications (IRDM) as an interesting technology company to watch. Iridium has some potentially lucrative technology, but I think high expenses limit its ability to generate cash.
However, if you are seeking a cheap tech stock with enormous growth potential, Iridium is worth a look. Iridium could own infrastructure that could theoretically generate enormous amounts of money.