Heavy Upfront CapEx And Weak Media Trends Will Pressure This Satellite Operator

Catalysts

About SES

SES is a multi orbit satellite connectivity company focused on media distribution and network services for government, mobility and fixed data customers.

What are the underlying business or industry changes driving this perspective?

• The long-term shift toward software defined multi orbit constellations requires heavy upfront investment. Projects like O3b mPOWER and meoSphere, together with IRIS2 commitments, are front loading 2026 CapEx to around €700 million, which can constrain free cash flow and slow any improvement in earnings and leverage.
• Structural pressure in traditional video distribution continues, with Media revenue on a like for like basis declining 11% in Q1 2026 and still affected by events such as the Brazilian customer bankruptcy. This can weigh on long term revenue stability and segment margins even as individual contracts renew.
• Competitive headwinds in Fixed Data, where like for like revenue declined 16.9% in Q1 2026, point to ongoing pricing pressure and customer churn as terrestrial and other satellite options expand. This can limit top line growth and put downward pressure on net margins.
• Government and Aviation businesses depend on large, lumpy contracts and timing sensitive awards, including U.S. programs affected by initiatives such as DOGE and shutdown related delays. Any slippage in awards expected in the second half could create revenue volatility and near term EBITDA pressure.
• Integration of Intelsat and delivery of €210 million targeted annual run rate synergies rely on sustained OpEx discipline. A 4.1x adjusted net debt to adjusted EBITDA ratio and a weighted average cost of debt around 4.2% mean that slower synergy realization or mix shifts toward lower margin equipment revenue could limit earnings growth and delay deleveraging.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming SES's revenue will grow by 5.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from -5.1% today to 2.4% in 3 years time.
• Analysts expect earnings to reach €81.6 million (and earnings per share of €0.22) by about July 2029, up from -€151.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €551.8 million in earnings, and the most bearish expecting €-83.0 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 55.4x on those 2029 earnings, up from -21.2x today. This future PE is greater than the current PE for the GB Media industry at 14.2x.
• Analysts expect the number of shares outstanding to grow by 0.61% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.71%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• SES is targeting sustained financial strength with disciplined capital allocation, strong cash generation and a clear focus on deleveraging, so if integration synergies and cost actions continue to reduce OpEx and support a 47.7% adjusted EBITDA margin, this could support earnings and balance sheet metrics rather than pressure them.
• Long dated Media renewals with ARD through 2039 and other contracts extending well beyond 2035, together with close to $100 million of Q1 2026 renewals, suggest that parts of the traditional video business still provide visible, cash generative revenue that may help support overall revenue and net margins instead of eroding them.
• Networks now represent over 66% of total revenues, with Mobility up 37.6% like for like and Government up 8.8% like for like in Q1 2026, so if demand for multi orbit aviation, maritime and defense connectivity remains robust, these segments could offset weakness in Fixed Data and Media and support consolidated revenue and EBITDA.
• Government activity, including about €40 million of Q1 2026 IRIS2 revenue and a reported gross backlog of €6.2b, indicates multi year commitments in areas such as sovereign connectivity and secure communications, which may underpin longer term revenue and earnings rather than leave the business overly exposed to short term contract timing.
• Planned front loaded CapEx of around €700 million in 2026 includes projects like O3b mPOWER, meoSphere and IRIS2, and management has already cancelled 2 GEO satellites that did not meet internal return thresholds, so if disciplined project selection and capacity redeployment, including the €81 million aviation contract restructuring, translate into higher value usage, this could support future revenue and margin quality instead of diluting returns.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of €8.24 for SES based on their expectations of its future earnings growth, profit margins and other risk factors.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €10.5, and the most bearish reporting a price target of just €5.2.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be €3.4 billion, earnings will come to €81.6 million, and it would be trading on a PE ratio of 55.4x, assuming you use a discount rate of 8.7%.
• Given the current share price of €7.67, the analyst price target of €8.24 is 7.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.