On Tuesday, SES SA (SESG:FP) (OTC: SGBAF) received an updated stock rating from CFRA, moving from 'Sell' to 'Hold', while maintaining a price target of EUR5.00. The adjustment reflects a valuation based on a consensus 2024 EV/EBITDA of 3.6 times, which is below the company's three-year average multiple of 5.2 times. The decision to maintain the price target comes despite the ongoing decline in the company's financial results and backlog, with CFRA leaving its earnings per share (EPS) estimates unchanged.
SES recently announced its intentions to acquire competitor Intelsat for $3.1 billion, marking a significant consolidation in the European satellite sector. Intelsat had only recently emerged from bankruptcy in 2022 and had previously engaged in unsuccessful merger discussions with SES in 2023. According to SES's CEO, the shift from merger talks to an outright acquisition facilitated a smoother regulatory approval process.
CFRA holds a neutral stance on the merger of SES and Intelsat. The firm acknowledges the potential for the deal to be free cash flow (FCF) accretive in the long term. However, it also notes the trade-offs, including a possible reduction in cash returns to shareholders, an increased debt load for SES, and the fact that the merger does not address the ongoing structural decline in SES's Video business.
The acquisition is seen as a strategic move in an industry facing significant changes, with SES aiming to strengthen its position through the integration of Intelsat's operations. Despite the potential benefits, CFRA's stance remains cautious due to the financial and structural challenges that lie ahead for SES as it works to integrate the two companies.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.