News broke Thursday (2 April) that Amazon (NASDAQ:AMZN) is in talks to acquire Globalstar for roughly $9bn. Even though nothing is confirmed yet, there may be some truth in it, with the story likely playing out in the coming weeks. This caught my eye, given the sector that Amazon appears to be pushing into and, If I’m correct, its stock could be set to outperform this year.
The space age
To understand the strategic logic, it’s important to know what Globalstar does. It’s a satellite telecommunications company that operates a Low Earth Orbit (LEO) constellation. It can therefore provide call access, high-speed data, tracking services and much more.
At the moment, SpaceX’s Starlink dominates the orbital internet service arena. It has thousands of satellites in orbit and millions of users globally. From the rumours around the purchase, it’s clear to me that Amazon wants to fast-track its LEO satellite ambitions and close the gap with Starlink. Right now, Amazon’s own network is still in its early stages of build-out.
Buying Globalstar would effectively give Amazon a shortcut. It can leverage existing satellites and infrastructure rather than building everything from scratch. Even at a potential price of $9bn, it’s a small price to pay for the big tech giant with a current market-cap of $2.2trn.
Share price potential
Things get even more interesting when you start to distil the potential benefits down to the stock. Investors like it when companies diversify operations, providing new revenue streams that are uncorrelated to the existing operations. This deal positions Amazon not just as an e-commerce or cloud giant, but as a serious player in what could become a multi-billion-dollar space internet market.
That’s the thing as we’re not talking about a niche tech experiment here. I saw a statistic that roughly three billion people globally still lack reliable internet access, and even in developed markets, there are significant coverage gaps. That’s where LEO satellite networks come in, and why SpaceX’s Starlink has already gained millions of users so quickly.
If Amazon can credibly challenge Starlink, it opens up a whole new long-term revenue stream layered on top of normal operations. Add in the fact that Globalstar has already been validated by partners like Apple (which owns a 20% stake since 2024), and I can see why it could positively impact the Amazon stock price.
Tempering enthusiasm
Of course, I need to be realistic. Firstly, the deal might not go through. As part of any negotiations, Apple would also need to be supportive of a sale, which might be tricky. Further, trying to pin down exactly how much revenue or positive impact it could have on the stock is impossible at this stage.
Despite those concerns, my gut tells me that this is a smart play from Amazon, and that the sector could be huge. On that basis, I’m thinking about adding the stock to my portfolio.
