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It’s amazing to think that Filtronic (LSE:FTC) was trading as an 11p penny stock just three years ago. Today, it’s a £574m business whose shares cost 263p each.
For those keeping count, that’s a barnstorming 2,290% increase since April 2023!
Yet one broker sees even more gains ahead and has just massively lifted its price target. Why has it turned so bullish?
Supersonic Filtronic
As a quick reminder, Filtronic is a specialist electronics company that designs and makes radio frequency (RF), microwave, and mmWave components. These are used across telecommunications, aerospace, and defence, and the space sector.
Filtronic shareholders can thank the latter for the stock’s surge, specifically Elon Musk’s SpaceX. The rocket and satellite giant partnered with the UK company in 2024 after taking a fancy to its E-band solid state power amplifiers and transceivers.
These allow Starlink satellites to talk to the ground at ultra-high speeds. In August, Filtronic bagged a £47.3m ($62.5m) contract with SpaceX, its largest ever deal.
For context, that was more than the firm generated in revenue for the whole of the previous year. CEO Nat Edington said the contract “validates the strength of our engineering capability“.
Bullish broker
Yesterday (28 April), Berenberg Bank reiterated its Buy recommendation on Filtronic and upped its share price target to 360p. That was well beyond its previous target of 213p, and is 37% above the current price.
The analyst team has turned more bullish after visiting the company’s new headquarters and manufacturing facility in County Durham. It called Filtronic “one of the best-positioned pure-play space names” in the UK.
While only three City brokers have covered the stock in the past three months, all rated it a Buy. However, the average price target among them is just 0.5% higher, including Berenberg’s 360p.
SpaceX war chest
Of course, analysts’ price targets often change like the wind, so they can’t be relied upon as gospel. But it’s hard not to be bullish about Filtronic’s future growth prosects.
After all, strategic partner SpaceX is gearing up for a massive IPO this summer. It may be the biggest ever if Elon Musk gets his way, with a $1.75trn valuation being talked about.
The good news for Filtronic is that SpaceX will be flush with cash if it raises between $50bn and $75bn of new capital. And with expansion of its Starlink satellite constellation a key priority, this bodes well for Filtronic’s high-frequency RF solutions.
Our core markets of space and defence continue to be supported by sustained satellite deployment activity, increased defence expenditure and growing requirements for secure, high-frequency communications.
Filtronic
Two key risks
Now, as bullish as I am (I’ve highlighted this stock nearly every month since January 2025), there are two risks to bear in mind.
The first is that record contracts from SpaceX have led to significant customer concentration. If anything went awry with this partnership, the share price could quickly collapse.
The second concern relates to valuation. After surging 187% in the past year, the stock now traded at more than 10 times sales. The forward price-to-earnings ratio is approximately 75.
I think a premium is warranted here due to the Starlink and defence growth opportunities. However, with the valuation looking a bit stretched, investors may want to consider building a position gradually through dips.
