Gilat Shares Plunge 60% Despite Robust Contract Growth and Strong Revenue
Gilat Satellite Networks shares dropped 60% despite securing $155 million in new contracts and strong financial growth, weighed down by technical index rebalancing and Starlink competition.
Gilat Satellite Networks has experienced a dramatic downturn, with its shares plunging by 60% and wiping out over $700 million in market value, despite trading at a five-month high just a short time ago. Currently valued at $636 million on Nasdaq and the Tel Aviv Stock Exchange, the company is led by CEO Adi Sfadia and specializes in satellite communication equipment, including micro-satellite earth stations, modems, amplifiers, and antennas.
This sharp decline occurs against a backdrop of seemingly robust business growth. According to data published by Needham investment bank analyst Ryan Koontz, Gilat has secured $155 million in new orders and contracts since last April, with the majority of revenues expected to be recognized over the next 18 months. However, the stock has trended negatively throughout most of this reporting period, persisting even after the company announced three new orders totaling $46 million.
The primary paper losers from this decline are prominent Israeli institutional investors—Migdal, Phoenix, Clal, Harel, and Yelin Lapid—some of whom purchased shares in two private placements last year at $9.35 and $11.25 per share, significantly higher than the current price of $8.20. Nevertheless, Needham maintains a bullish 'Buy' rating on Gilat with a price target of $20, representing a potential 142% premium.
Technical Pressures and Index Rebalancing
Market experts point to a convergence of factors weighing on the stock, notably a technical sell-off. Lior Vieder, founder and manager of the 'Profit Multiplier' financial service and a regular columnist for Globes, explains that the immediate downward pressure stems from Gilat's anticipated removal from the Tel Aviv 90 and Tel Aviv 125 indices during the upcoming index rebalancing.
Unless an extraordinary stock rally occurs or the company executes a surprise share offering, the index exit is projected to trigger massive passive selling by tracking funds and ETFs, estimated at nearly 300 million shekels. Vieder notes that this financial volume is dramatic relative to the stock's average trading turnover, leading the capital market to pre-emptively price in the liquidation wave.
M&A Strategy and Competitive Pressures
Other challenges involve Gilat's pending $157.5 million acquisition of Comtech's satellite and space division, which is expected to close in the fourth quarter and immediately contribute to earnings. While the acquisition expands Gilat's footprint in the lucrative defense sector, some investors harbor concerns regarding the integration process following Comtech's past financial deterioration.
Additionally, Starlink, Elon Musk's satellite internet venture under SpaceX, is aggressively disrupting the industry. Vieder highlights that Starlink is putting heavy pricing pressure on traditional satellite operators and telecom companies, which constitute Gilat's core customer base. Gilat's strategic response relies on differentiating itself in resilient niches, such as secure military communications, in-flight connectivity (IFC), and multi-orbit ground infrastructure.
Strong Financial Performance
Operationally, Gilat posted $233 million in revenue for the first half of the year, marking a 17.3% growth compared to the same period in 2025. Net income surged from $3.8 million to $13.4 million, while adjusted EBITDA jumped 57.2% to $30.5 million. The company projects full-year revenues of $500–$520 million and an adjusted EBITDA of $61–$66 million.
