Gilat's $11M APAC Contract Win Highlights Momentum but Valuation Remains Elevated

What happened

Gilat Satellite Networks has won an $11 million contract in the Asia-Pacific region for its SkyEdge platform, focusing on next-generation Very High Throughput Satellite (VHTS) networks. This deal underscores the company's ongoing traction in VHTS deployments, a growth area aligned with its strategic pivot toward defense, commercial, and Peru segments. However, the latest DeepValue report indicates that Gilat's stock has doubled over the past 12 months, trading at approximately 31x earnings and roughly double a free cash flow-based DCF anchor of $6 per share. The report cautions that despite improved profitability and a net cash balance sheet, the valuation offers limited margin of safety given risks from competitors like Starlink, project dependencies in Peru, and technological commoditization. Thus, while this contract reinforces growth prospects, it does not sufficiently address the overvaluation concerns that support a 'WAIT' stance.

Implication

The APAC win demonstrates Gilat's ability to secure deals in evolving satellite markets, potentially supporting revenue growth in its commercial segment. It aligns with the company's strategic focus on next-gen networks, as highlighted in the DeepValue report's emphasis on execution in defense and IFC. However, with the stock trading at elevated multiples, this $11 million contract alone is unlikely to justify the current price without broader, sustained contract wins and margin expansion. Investors should monitor if such developments lead to durable high growth or if valuation pulls back toward the DCF anchor, as per the report's watch items. Until then, the risk/reward remains unfavorable, reinforcing a cautious approach despite positive news.

Thesis delta

This contract provides incremental evidence of Gilat's execution in next-gen satellite networks, supporting the growth aspect of the thesis. However, it does not fundamentally alter the valuation overhang or reduce the technological and project risks outlined in the DeepValue report. The core thesis of waiting for a better entry point or clearer evidence of sustainable growth remains intact.