Consumer electronics giant Apple (AAPL) is investing $1.5 billion in satellite communications company Globalstar (GSAT) to expand the iPhone’s ability to employ satellite services.
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The two companies disclosed the investment in a regulatory filing with the U.S. Securities and Exchange Commission (SEC). The deal will see Apple allocate $1.1 billion in cash to Globalstar, of which $232 million will go toward paying down the satellite company’s debt. The arrangement will also see Apple take a 20% equity stake in Globalstar.
The deal, which is expected to close on Nov. 5, will increase the ability of Apple to provide satellite phone service on its iPhones at times when the devices are out of internet range. Apple previously collaborated with Globalstar on the 2022 introduction of its iPhone emergency satellite texting service.
Benefits of Satellite Connectivity
Being able to connect the iPhone to satellites in outer space gives users the ability to continue making phone calls and text in areas where there is no internet coverage. Proponents say this is beneficial in rural and remote areas, as well as in emergency situations.
For Apple, the expanded relationship with Globalstar helps grow its presence in the burgeoning satellite connectivity market, and gives the iPhone an additional selling feature. In addition to paying down debt, Globalstar said the new investment from Apple will allow it to purchase new satellites and expand its ground infrastructure. The company currently operates 31 satellites in Earth’s orbit.
GSAT stock is up 35% on news of the investment from Apple. News of the deal comes a day after Apple released its latest financial results, which exceeded Wall Street forecasts. AAPL stock is up 16% on the year.
Is AAPL Stock a Buy?
Apple stock has a consensus Moderate Buy rating among 33 Wall Street analysts. That rating is based on 23 Buy, eight Hold, and two Sell recommendations assigned in the last three months. The average AAPL price target of $247.64 implies 11.09% upside from current levels.
