Don’t Chase the Triple-Digit Rally: A Cautionary Tale of Eutelsat

The promise of a “triple-digit rally” in Eutelsat Communications S.A. (ENXTPA:ETL) has been a myth for investors over the past 12 months. Despite rumors of explosive growth, the satellite operator’s stock delivered a -1.40% return from April 2024 to April 2025—a stark contrast to the hype. Beneath the surface lies a story of declining revenue, rising competition, and a market that’s punishing complacency. This article dissects why chasing Eutelsat’s stock now is a perilous bet, even as it outperformed its sector.

A Market Outperformer, But Not a Winner

While Eutelsat’s performance beat the French Media industry’s -19% decline and the broader French market’s -11.1% drop, its own -1.40% return underscores a harsh reality: outperforming a collapsing sector doesn’t equate to success. The stock’s Beta of -0.21 reveals its inverse correlation with the market—meaning it moves against broader trends—a trait that amplified volatility. Over the past year, Eutelsat’s weekly price swings averaged 48.9%, dwarfing the French market’s 5.2%, as seen in this comparison:

This volatility isn’t just noise. It reflects existential challenges:

The Triple Threat to Eutelsat’s Future

1. Debt Overhang:
   Eutelsat’s €3.2 billion debt pile looms large. Analysts warn that rising interest rates and declining cash flows from traditional video services—still 70% of revenue—are squeezing margins. With earnings estimates cut repeatedly in 2024–2025, servicing this debt will require a miracle.

2. Satellite Competition Heating Up:
   Low-Earth Orbit (LEO) players like Starlink and OneWeb are eroding Eutelsat’s dominance in broadband. The company’s legacy geostationary satellites struggle to compete with LEO’s faster speeds and lower latency. Even its strategic bets—such as the SpaceRISE and IRIS² initiatives—are years from commercialization and fraught with execution risks.

3. Structural Decline in Video Demand:
   As streaming giants like Netflix shift to terrestrial fiber, Eutelsat’s core TV broadcast business is crumbling. Revenue from video services fell 12% annually in 2024, with no clear replacement to fill the void.

Valuation: A Trap in Disguise

While Eutelsat trades at 79.7% below its estimated fair value, this discount isn’t a bargain. It’s a market pricing in years of underperformance. Consider:
- Price Target Cuts: Analysts slashed price targets by 40% in 2024 alone.
- Dividend Risk: The €0.15 annual dividend—now yielding 4.1%—is unsustainable if cash flows deteriorate further.

The Bottom Line: Stay Clear of the “Rally”

Eutelsat’s stock may have dodged the worst of its sector’s collapse, but it’s not a buy. Key risks remain unresolved:
- Execution Uncertainty: Its LEO partnerships lack a clear revenue timeline.
- Sector Headwinds: The satellite industry’s transition to LEO is irreversible, and Eutelsat’s legacy infrastructure is a liability.
- Valuation Mispricing: The 79.7% discount reflects a “value trap”—a stock cheap for a reason.

Investors should heed this warning: A -1.40% return in a falling market isn’t a victory—it’s a sign of fragility. With a Beta suggesting further volatility and structural challenges unaddressed, Eutelsat’s “rally” is a mirage.

Final Verdict: Avoid

The numbers are clear. Eutelsat’s stock is a high-risk play with limited upside. Until it restructures debt, diversifies revenue, or proves its LEO strategy, the “triple-digit rally” remains a dangerous illusion. For now, prudent investors should steer clear—this satellite’s trajectory isn’t pointing skyward.