Investors holding Filtronic (LSE:FTC) in their Stocks and Shares ISA portfolios have been pretty happy lately. The stock’s up 87% so far in 2025, and 1,500% over five years.
Elon Musk gets a lot of bad press these days, but his satellite and space exploration company SpaceX has undoubtedly been great news for Filtronic shareholders. Indeed, the share price jumped another 8% today (26 August).
The question now is, does surging Filtronic stock still merit consideration for an ISA?
Record order
For those unfamiliar, Filtronic makes specialist radio frequency technology for the space, aerospace and defence, and telecoms infrastructure markets.
News out of the firm today is that SpaceX has placed a bumper £47.3m ($62.5m) order for its next-generation gallium nitride E-band product. This delivers more than double the output power of the existing product line.
These solutions enable seamless data transmission, lower latency and enhanced connectivity. And this is why SpaceX needs them for its Starlink satellite internet constellation.
The order was Filtronic’s largest to date. And it says the first units will ship in FY2027 (starting June 2026) and should “deliver material revenues” across FY2027 and FY2028.
Now, one thing to note here is that the requirements for warrants tied to Filtronic’s next-generation partnership with SpaceX have been tweaked. A warrant is essentially an option to buy shares in future at a set price.
Put simply, SpaceX will only get extra Filtronic shares if the company actually delivers double the volume of these new products. That means existing shareholders would be diluted, but the company’s growth from SpaceX orders will likely far outweigh this.
Customer concentration risk
Before today’s news, analysts expected the company to report around £60m in revenue next year (FY2027). For context, sales in FY2023 were £16.3m, which highlights how quickly Filtronic is scaling up.
However, this £60m figure’s now set to be higher, while earnings per share estimates should also be revised upwards. So the current forward price-to-earnings ratio of 48 probably isn’t as high as it seems.
Moreover, Filtronic has been securing new contracts in the defence sector. In July, it announced a order worth £13.4m to supply high-performance modules for an electronic sensor system.
With Europe embarking on a multi-decade rearmament programme, I think there’s a strong likelihood of further defence communications orders. Customers already include Leonardo and BAE Systems.
That said, there’s significant customer concentration risk with SpaceX. Were something to go wrong with this strategic partnership, I think the Filtronic investment case would quickly unravel.
Indirect Starlink exposure
Unfortunately for investors, SpaceX remains a private company. Its founding mission to colonise Mars over the next two decades doesn’t fit well with Wall Street analysts’ time horizons, which is generally the next quarter or two.
In other words, the long-term ambition of SpaceX is a poor fit for the short-term obsessions of Wall Street.
But we know that Starlink’s growing rapidly, and now connects 6m+ people with high-speed internet across 140 countries and territories. As Starlink’s subscriber base expands, demand for key components inside its terminals will surely rise.
Therefore, I see Filtronic as an interesting play on Starlink’s growth. The stock may look pricey at first glance, but given the long-term growth potential here, I think it’s worth considering at around 145p.
