Today (10 February) was another great day for shareholders in Filtronic (LSE: FTC), as the ex-penny share jumped 12% to a 16-year high of 104p. This means it has gained nearly 700% in two years!
For those unfamiliar, AIM-listed Filtronic designs and manufactures products for aerospace, defence, space, and telecoms infrastructure markets.
The reason for this meteoric surge is down to its game-changing partnership with Elon Musk’s SpaceX. This centres around supplying radio frequency (RF) components to support SpaceX’s Starlink satellite constellation, which provides high-speed internet globally.
What happened
The stock was up big today after bagging a bumper new contract with SpaceX.
CEO Nat Edington announced: “We are delighted to have secured this substantial order, which underscores Filtronic’s reputation for delivering high-performance RF solutions to our market leading customer. This contract, alongside our growing momentum in strategic markets, provides us with increased confidence in our ability to exceed our growth targets for FY2025 and FY2026.”
The deal is valued at nearly £17m, and is the fourth contract win with SpaceX since April 2024. Clearly, this partnership with the world’s most valuable private company is deepening, which is excellent news for Filtronic shareholders.
Valuation
In light of this news, analysts have been scrambling to update their projections. For the current year (FY25 running to the end of May), broker Cavendish now sees revenue hitting £50.4m and earnings per share (EPS) of 5p. That would represent year-on-year growth of 98% and 255%, respectively.
However, for FY26, the updated forecast is revenue of £43m and EPS of 3.2p. Based on this, the stock is trading on a forward price-to-earnings (P/E) multiple of 32.5.
While that appears quite high, it obviously doesn’t factor in the likelihood of further contract wins. I wouldn’t rule that out given the trading momentum and the sheer size of the growing global defence and space markets.
What could go wrong?
On the other hand, as SpaceX revenue grows into a larger share of the pie, the risk of customer concentration increases.
If there were any potential product faults, or if SpaceX decided to manufacture their own products in-house, then that could be disastrous for the Filtronic share price.
Mega-constellation
Hardly a week goes by without SpaceX adding a few more internet satellites to its Starlink mega-constellation. On 8 February, it sent another batch of 21 into low orbit, including 13 with direct-to-cell capability.
In other words, they can connect to smartphones. T-Mobile Starlink, for example, now automatically connects in areas of the US where no cellular network reaches.
SpaceX eventually aims to have as many as 42,000 satellites, up from around 7,000 today. This will take several more years to build out.
Indirect SpaceX play
I’ve wanted to invest in SpaceX for ages (since reading The Space Barons: Elon Musk, Jeff Bezos, and the Quest to Colonize the Cosmos, a 2018 book by Christian Davenport). Unfortunately, it remains a private company, despite being valued at $350bn.
However, Filtronic arguably offers an indirect way to hitch a ride. It says its “cutting-edge technology…plays a crucial role in the deployment of SpaceX’s Starlink constellation“.
Give that is the case, the firm’s sales look set to motor higher over the coming years, assuming it doesn’t lose the contract. I’m tempted to start a position later this month.
