Famed investor Cathie Wood recently parked nearly $10 million in the McLean-based Iridium Communications Inc. (NASDAQ: IRDM).
Wood, the founder and chief executive of Ark Invest, loaded up on more than 418,000 shares last week of the company that operates the Iridium satellite constellation.
Wood’s update arrives only days after Iridium reported better-than-expected financial results for its first quarter.
However, there are reasons for investors to remain wary of investing in IRDM shares.
Iridium Communications’ stock (IRDM) is exposed to Trump tariffs
For starters, Iridium is significantly exposed to higher tariffs under the Trump administration.
Nations have already started retaliating against the US President’s aggressive tariffs that threaten to disrupt global supply chains across all industries.
This could prove a major headwind for Iridium Communications stock this year as it sells about a quarter of its equipment only to local customers.
“With new tariffs and US trade policies still in flux, we expect to incur incremental equipment costs this year,” the company’s chief executive told investors in the earnings release on April 22nd.
These incremental costs could be as much as $3 million in 2025, Desch added.
So, the macro uncertainty warrants caution in building a sizable position in Iridium shares this year.
IRDM’s Q1 earnings had spots of weakness, too
Iridium Communications topped Street estimates in its fiscal first quarter, but not all parts of its release painted a picture of strength.
A potential increase in equipment prices due to Trump tariffs is significant for IRDM, as “equipment” is already the segment that’s losing traction in 2025.
Much of the strength in Iridium’s latest reported quarter was attributed to its service segment, while revenue from equipment was actually down 7% on a year-over-year basis.
Even for the full year, the Nasdaq-listed firm’s management said equipment sales were only expected to come in line with 2024 at best, which does not inspire a lot of confidence in buying IRDM shares.
Wall Street sides with Cathie Wood on Iridium
On the flip side, Wall Street analysts agree with Cathie Wood on Iridium Communications stock, especially now that it’s down some 25% versus its year-to-date high in February.
The consensus rating on IRDM shares currently sits at “buy” with the mean target of $39.50, indicating potential for about a 70% upside from current levels.
Plus, Iridium is a dividend stock that currently yields 2.42%, which makes it even more appealing to own in 2025.
All in all, while the valuation is compelling and experts are siding with Iridium stock, there are meaningful risks, including ones related to how the tariffs situation unfolds moving forward, tied to buying IRDM, that warrant caution in approaching this satellite communications firm.
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