Viasat (NASDAQ:VSAT) shares fell nearly 2% in premarket trading on Thursday as investment firm William Blair downgraded the satellite communications company, citing the recent outperformance of the stock and increased competition.

“Following the stock’s 18% return versus the S&P 500’s 5% gain to start 2023, we think there is equal risk/reward,” analyst Louie DiPalma wrote in a note to clients. “In our view, high leverage, capex, and competition may offset the positive developments from Delta Airlines (DAL) February 1 rollout of free Wi-Fi.”

Competition has been a thorn in VisaSat’s (VSAT) side and it may not get easier any time soon, DiPalma added, as the launch of the ViaSat-3 satellite and subsequent entry into service may not be enough to keep from losing subscribers to SpaceX’s Starlink. Additionally competition is set to increase further, with the launch of Amazon’s (AMZN) own Kuiper-branded satellite service, likely coming between 2024 and 2025.

The analyst also noted that ViaSat’s (VSAT) deal to acquire Inmarsat is still pending, awaiting regulatory approval, and could present risks if the deal closes.

“ViaSat-Inmarsat should ultimately be valued on free cash flow like Iridium (IRDM) and Gogo (GOGO), but there may not be free cash flow for several years,” DiPalma added.

“Reducing outer-year capex may prove difficult as ViaSat and Inmarsat are committed to launching 11 satellites over the next four years,” DiPalma posited.

On the plus side, DiPalma noted that ViaSat (VSAT) is still the industry leader for commercial inflight connectivity and has continued to best SpaceX for contracts. Assuming the Inmarsat deal closes, the combined company will have 2,842 commercial aircraft online and a combined backlog of approximately 3,000 more aircraft.

The aforementioned deal with Delta (DAL) for free Wi-Fi, which starts on February 1, “has the potential to nearly double the revenue generated per aircraft,” DiPalma added.

Earlier this week, Viasat (VSAT) was awarded a contract to provide end-to-end satellite communications support through a fully managed service to the United States Marines.

Analysts are largely cautious on Viasat (VSAT). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates VSAT a HOLD.