Filtronic Shares (LON: FTC) Gain With Berenberg Coverage

Filtronic plc shares (LON: FTC) are experiencing a surge of investor confidence following Berenberg's initiation of coverage with a ‘Buy' rating, signaling a potentially lucrative period for the high-frequency RF and mmWave solutions provider. This endorsement underscores Filtronic's strategic positioning within the rapidly expanding space industry.

The market responded positively to the analyst's report, with Filtronic shares climbing 3.87% in the last 5 days. This upward trajectory adds to the stock's impressive year-to-date performance, now boasting a gain of 79.25%. The Berenberg analysis has instilled further confidence in the company's growth prospects, setting a price target of 196 GBp.

Filtronic's ascent is largely attributable to its strategic partnership with SpaceX, solidifying its role as a key supplier in the burgeoning space sector. The initial agreement with SpaceX, announced in April 2024, involved the ongoing supply of E-band Solid State Power Amplifiers (SSPAs) and the development of related products across multiple frequency bands for the Starlink constellation, commencing with an initial order valued at $19.7 million (£15.8 million) slated for delivery in fiscal year 2025. This collaboration not only validated Filtronic's technological capabilities but also provided a platform for scaling manufacturing and advancing its technology roadmap.

Subsequent contract wins from SpaceX have further strengthened Filtronic's financial outlook. These include a $9 million (£7.1 million) order for E-band SSPA modules in July 2024, an $8.4 million (£6.4 million) order expected to be fulfilled within the 2025 financial year, and a $32.5 million (£24 million) order for E-band Cerus 32 SSPAs anticipated for delivery in the 2026 financial year. The most recent, and largest, order is valued at £47.3 million ($62.5 million) for next-generation Gallium Nitride (GaN) powered E-band SSPAs, scheduled for delivery in the 2027 financial year.

These successive contracts have boosted Filtronic's revenue, more than doubling it to £56 million in the fiscal year ending May 2025. This financial upswing, coupled with the SpaceX partnership, has attracted positive analyst attention, culminating in Berenberg's ‘Buy' rating. Following the initial SpaceX partnership announcement in April 2024, Filtronic's shares surged by 50%, reaching a decade-high, reflecting strong investor confidence in the company's growth trajectory.

Analysts note Filtronic's successful transformation from a traditional RF component supplier to a key player in the space industry, with its focus on high-frequency communication equipment positioning it to capitalise on the increasing demand for satellite communications infrastructure. While the outlook is largely positive, some caution that the company's valuation metrics are high and that risks associated with customer concentration and order volatility should be considered.

Analyst Summary: Bull and Bear Cases

Berenberg's ‘Buy' rating and 196 GBp price target reflect a strong belief in Filtronic's growth potential within the space industry, however, investors should remain aware of potential risks, including dependency on key customers and the inherent volatility in the aerospace and defense sectors. The recent analyst coverage may signal a sustained period of investor confidence for Filtronic, driven by its strategic alignment with the burgeoning space economy.