Gilat's $10M Defense Order Reinforces Growth but Leaves Valuation Concerns Unaddressed

What happened

Gilat Satellite Networks announced a new $10 million order for a direct downlink earth observation solution under its Gilat Defense unit, expanding its advanced capabilities portfolio. This award aligns with the company's recent operational momentum, as highlighted in the DeepValue report, which noted raised 2025 revenue and EBITDA guidance following strong quarterly results. The order supports the report's watch item on defense segment growth post-acquisitions, such as DataPath and Stellar Blu, aimed at driving EBITDA margin expansion. However, at $10 million, this win is modest compared to Gilat's total unsatisfied performance obligations of approximately $293 million and recent larger awards like the >$8 million Israeli MoD deal. While it adds to near-term backlog visibility, it does little to mitigate core risks, including a high ~30x P/E valuation, supplier dependencies, and customer concentration where top three clients account for 38% of revenue.

Implication

The $10 million defense order bolsters Gilat's backlog, potentially easing conversion risks and reinforcing the company's upward guidance trajectory. It demonstrates continued traction in the defense sector, which is critical for achieving margin expansion post-acquisitions and aligning with secular tailwinds in satellite communications. However, the order size is small relative to total obligations, limiting its financial impact and failing to address the high P/E ratio that the report flags as a concern. Investors should remain cautious about unchanged execution risks, such as supplier dependencies and geopolitical exposures, which could disrupt operations. Therefore, while positive for near-term momentum, this news reinforces the need for larger-scale diversification and sustained margin improvements before considering an upgrade from HOLD.

Thesis delta

The $10 million defense order does not materially shift the HOLD thesis from the DeepValue report. It supports the defense growth narrative but is insufficient to upgrade due to unchanged valuation overhang at ~30x P/E and ongoing execution risks like customer concentration. Investors should continue monitoring for larger, sustained wins and margin progress as per the report's watch items on backlog conversion and integration hiccups.