In an almost flat market, the leap of this morning stands out Avio (+8,3%), the public company (the free float is equal to 62%) which has rocketed into orbit thanks to an exceptional financial engine: Merrill Lynch Bank of America, which announced that it has started coverage of the title with a target price double that of last night: 26 euros and Buy recommendation for a title that this morning was just 13,84 euros, ie just over half. An unexpected flight for a stock that has recorded an 12% increase in the last 18 months, just below the market average.
What is the appreciation of the US broker due to? It's not difficult to link the market interest with the presentation given at the recent Bank of America Staars Conference. There, on 23 March, the CEO of Avio Giulio Ranzo gave a speech entitled "The European gateway to space", in which he illustrated the characteristics of space launchers built on behalf of ESA and Arianespace, i.e. the Ariane 6, destined to replace the 5 in 2023, and the Vega C, the light launcher (150 kilos of peco, slightly bulkier than a washing machine) of which Avio is prime contractor, whose qualification launch is expected for 2022.
Vega is the main reason for the broker's interest. For experts Avio is well positioned to exploit the acceleration of the market for low earth orbit satellite launchers (Leo), which according to expectations will grow by an average of 14% annually between 2019 and 2028. But on the supply front there are few active subjects in the sector, characterized by high entry barriers (from 2 to 8 billion euros to create a network) but also by forecasts of strong growth due to projects for mega-constellations of satellites in low orbit and growing public investments which make the space one of the most promising investment terrains of the near future. Especially in the communications sector.
Today, in truth, satellite communications represent less than 1% of the global data transmission market: only 6 billion out of 800. “But the requests – recently said the managing director of the Italian-French joint venture Thales – are so strong that it is easy to predict in short at least doubling. The problem is not to compete with fiber, but to occupy those niches where the fiber will never reach. For Europe alone, there are at least four million families that can only be reached from the sky. In Africa, by 2030, the potential demand will be at least 5 million users".
A market, among other things, to be covered in a short time, because the initiatives of Elon Musk e Jeff Bezos, Besides OneWeb, created by entrepreneur Greg Wyler, are quickly occupying available orbits, now crowded more than a highway in August. In this context, by the end of April nine European industrial groups, including Airbus, Eutelsat, Tas and Arianespace, will have to present in Brussels a feasibility study for a European satellite network. In short, work will not be lacking for Avio.
