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Here we go again, folks. Yesterday, nearly one month to the day after investment banker Jefferies & Co. predicted that satellite telecommunications company Intelsat (NYSE: I) would boldly go to $5 (it was trading at $4 a share at the time), the stock has been there and done that.
Yesterday, Intelsat stock jumped 11% in response to news (out of a conference in Scottsdale, Ariz.) that the company was going to team up with Intel (NASDAQ: INTC) to lobby the Federal Communications Commission to permit "co-primary" operations in the radio frequency bands 3700 and 4200 MHz. Today, Intelsat stock is up another 12.3% (as of 1 p.m. EDT), and was up as much as 20% at one point.
In theory, success in the lobbying effort would allow satellite operators such as Intelsat to expand use of said frequencies, and would at the same time boost adoption of wireless applications that could make use of Intel technology.
Of course, in marked contrast to Intelsat, Intel stock was down yesterday -- and down again today despite the news. So what is it that's got investors so excited about Intelsat's prospects -- and for that matter, why aren't investors at all enthused about how this news will benefit Intel?
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The latter question is easier to answer: Even if the FCC eventually agrees to permit co-primary use of the named frequencies, such use isn't expected to begin for another "1-3 years," only in limited "geographic areas," and only within the United States -- none of which sounds like it will result in an immediate boost to Intel's business.
As for why Intelsat is going up while Intel is going down based on skimpy news? That's a tougher nut to crack.
My guess? This is a simple case of momentum begetting more momentum. Intelsat stock shot up big-time yesterday, on a day when it was known to be presenting at a conference in Arizona. Few investors, I imagine, bothered to listen in to that conference to find out what was really discussed (and Intelsat itself has issued no press releases describing what was talked about). But seeing the stock rising as the conference progressed, investors may have logically assumed that Intelsat must have revealed some news of more importance.
Now, they're jumping on the bandwagon -- and they're bound to get burned.
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