Globalstar (GSAT) shares closed nearly 15% higher on April 2 following reports that Amazon (AMZN) is in advanced talks to acquire the satellite communications firm for about $9 billion.
This potential acquisition is reportedly a strategic play to strengthen Amazon Leo as it races to compete with billionaire Elon Musk’s satellite-internet network, Starlink.
Versus its year-to-date low, Globalstar stock is now up roughly 45%.
Is it Too Late to Invest in Globalstar Stock?
While the prospect of an AMZN buyout is exciting, the window for meaningful gains may have already slammed shut.
According to the Financial Times, the e-commerce behemoth is willing to pay $9 billion for GSAT — but its market cap has already ballooned to nearly $10 billion following today’s stock price rally.
This means the market hasn’t just “priced in” the potential acquisition premium, but has arguably overshot it.
Investors buying at these levels are essentially paying a premium above the expected deal price, leaving virtually no upside in GSAT shares following the official announcement.
Moreover, if Amazon chooses to take Globalstar private, shareholders will be cashed out at a fixed price, further capping potential for capital gains.
Merger Failure Could Crash GSAT Shares
On the flip side, the downside risk is even more concerning should the merger fail.
Since GSAT’s recent gains are built entirely on acquisition rumors instead of fundamental business growth, if negotiations collapse, it may crash just as quickly to the pre-rumor levels.
Meanwhile, there’s hardly any solace to be found in the firm’s current valuation either. Globalstar shares are currently going for eye-watering 2,500x forward earnings, which makes them a gamble at best.
Even from a technical perspective, GSAT’s relative strength index (14-day) surpassed 67 today, indicating upward momentum is now approaching exhaustion.
How Wall Street Recommends Playing Globalstar Inc
It's also worth mentioning that Wall Street analysts saw Globalstar as fairly valued at its pre-rumor price.
According to Barchart, the consensus rating on GSAT stock sits at “Moderate Buy” currently, but the mean target of $69.75 is only slightly above the price at which it was trading before the Amazon news.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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