A First Mover Advantage with Globalstar Inc. Calls

We open up our options trading activities this week with call plays on a telecommunications company. Globalstar, Inc. (NYSEMKT: GSAT) a small cap with a valuation of $3.05 billion is a provider of mobile voice and data communications services globally via satellite. Globalstar’s satellite communications business, by providing critical mobile communications to the company’s subscribers, serves principally recreation and personal; government; public safety and disaster relief; oil and gas; maritime and fishing; natural resources, mining and forestry; construction; utilities and transportation.

Technical Indicators Suggest a Bullish Trend

Globalstar got my attention today after a trend-spotter signaled a bullish trend with buy prospects on the high side. Shares of Globalstar have gained 2.02% today and are now trading around $3.53 (2:54PM EDT) apiece. More interesting is the fact that the stock has made a new 52-week high at $3.70 in today’s trading activity. The chart below shows stock of Globalstar trading high above its 20, 50 and 200-day moving averages.

GSAT chart

From the chart above, you will see that Globalstar has made 14 new highs and that the stock has gained 26.14% in the last one month. Bears may advise caution on going bullish on Globalstar because of the RSI of 78.47 that suggests that the stock might be entering overbought territory. However, the fundamentals show that support might be holding in the new highs and thus, a bullish position on this stock is not out of place.

Fundamentals Suggest Support in the New Highs

Globalstar’s bullish run has been impressive so far and I can see more room to soar in its $3.05B valuation going forward. One of the reasons behind my optimism on Globalstar is an expected 8.50% growth in revenue this year and another anticipated 20.10% growth in revenue in fiscal 2015. More interesting is the fact that earnings is expected to skyrocket by 63.20% next year and a 15% annual increase is in the books over the next 5 years.

It might be necessary to delve into the past to provide you with perspective into the possibility that Globalstar will reach and surpass these lofty expectations. Below are highlights of Globalstar’s first quarter 2014 earnings results:

  • Revenue was reported with an increase of 6% at $20.5 million in the Q1 2014 compared to $19.3 million in Q1 2013
  • Service revenue increased 6% from $15.4 million in Q1 2013 to $16.2 million in the just reported quarter
  • Revenue from Subscriber equipment sales increased 9% to $4.3 million in the first quarter
  • Adjusted EBITDA increased 54% from $2.5 million in Q1 2013 to $3.8 million in the just reported quarter

Possibilities Ahead

Globalstar announced that it has been awarded a the first regional pilot project to outfit Ecuadorian artisanal fishing fleet with 4,000 life-saving satellite tracking and emergency notification device. Also in May, Globalstar announced the marking of the 3,000th rescue with its SPOT Satellite device, which has been life-saving technology for outdoor enthusiasts and adventurers.

How to Trade GSAT Options

Without making unnecessary repetitions, it is obvious that a bullish position on Globalstar is justified. I recommend call options and a $5 price target within the next 6 months is reasonable given the speed at which the stock is recording gains in its share price. The $0.90 asking price on the GSAT Jan 2015 5.000 call (GSAT150117C00005000) is a great entry position into GSAT calls.

— Daily Option Alerts

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