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Why the Speedcast share price has rocketed 46% in 3 days

The Speedcast International Ltd (ASX: SDA) share price has rocketed 46% since Friday’s open to close yesterday at $1.16 per share.

But how is it that the Aussie satellite company’s share price is still down more than 50% so far in 2019?

Why is the Speedcast share price so low in 2019?

Speedcast’s share price plummeted in early July when the company announced its expectations for 1H 2019 and FY2019 underlying earnings.

Speedcast downgraded its half-year earnings before interest, tax, depreciation and amortisation (EBITDA) guidance to US$60–64 million due to weaker market conditions, delays in expected revenue from the NBN and technical difficulties in its Carnival contract ramp-up.

Subsequent to the announcement, the Speedcast share price had been trading between $1.60 to $1.90 per share throughout July and August, before its half-year results release on 27 August.

The Aussie communications group reported underlying net profit after tax and amortisation (NPATA) of US$14.7 million and underlying EBITDA of US$66.8 million.

Why the Speedcast share price has rocketed higher

Given the Speedcast share price has fallen 67% lower since July 1, the latest share price surged could be seen as a “dead cat bounce” – where a cheap stock gets bought up only to fall back down again.

The biggest factor behind the latest Speedcast share price surge appears to be institutional buying, with Mitsubishi UFJ Financial Group snapping up a 5.46% stake in the Aussie communications group via a 13,092,301 share purchase.

While the institutional money might be flowing into Speedcast shares on the cheap, I don’t know if I’d be willing to follow suit just yet.

What’s the verdict on Speedcast shares?

At the time of writing, Speedcast boasts a market cap of $278.1 million with a dividend yield of 6.2% per annum, which on the surface looks like it could be a buying opportunity.

However, the Speedcast share price was trading as high as $6.69 per share just over a year ago, yet before the latest surge was trading at just $0.68 per share.

Given the significant volatility we’re seeing in the stock, as a retail investor I don’t have enough of a feel for what’s going on behind the scenes and would be sitting this one out.

For exposure to the Communications sector, I’d be instead looking at the likes of Vocus Group Ltd (ASX: VOC) after a solid full-year result in which it met FY19 guidance and reaffirmed FY20 guidance figures.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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