Analyst review... Despite pushing the initial launch of its WorldView Legion satellites back further to September, Maxar Technologies Inc.’s fundamentals appear to support capacity expansion following a “relatively strong” first quarter, according to RBC Dominion Securities analyst Ken Herbert.
“The company indicated that it discovered a test anomaly during environmental testing on the second satellite,” he said. “We do not believe investors are too surprised by the push to September for the first launch, but the delays do add to risk associated with timing of the initial and subsequent launches. The company expects to have 3 satellites ready by September for launch, but it continues to expect three launches (2 satellites each) paced 3 months apart. The company has started to procure long-lead items for WV Legion 7 and 8, which will eventually replace the Legion 3 satellite, highlighting the strong Earth intelligence demand environment.”
After the bell on Monday, Colorado-based Max reported sales for the quarter of US$405-million, up 3 per cent year-over-year and above Mr. Herbert’s projection of US$400-million. An adjusted earnings per share loss of 10 cents also topped his estimate (a 14-cent loss).
“The company largely kept its 2022 guidance unchanged, with a slight adjustment to its Space Infrastructure segment,” he said. “The company has not updated its 2023 outlook. The headline of another pushout in the WV Legion timing is disappointing, but we view the Earth intelligence demand environment as strong, and believe the eventual launch of the first two WV Legion satellites will be a strong positive catalyst.”
Keeping an “outperform” rating, Mr. Herbert trimmed his target to US$44 from US$48. The average is US$44.71.
“The continued delays in the potential catalysts (EOCL and WV Legion) are disappointing, but we believe the 2023 targets remain on track and well positioned in key space markets. We expect incremental upside due to the invasion of Ukraine, but the business mix in the Space Infrastructure segment to more government work will likely continue to lag expectations,” he said.
Elsewhere, believing its shares are now unvalued Canaccord Genuity’s Austin Moeller upgraded the stock to “buy” from “hold” with a US$38 target, up from US$42.
“The considerable stock market turmoil this week now has the stock trading at 8.5 times NTM [next 12-month] EBITDA, which we view as pretty inexpensive considering the average 3-year multiple of 9.4 times,” he said. “Considering that 50 per cent of the Legion constellation is nearing mission readiness now, we believe it is time to do a little clearance shopping considering the company’s robust fundamental backdrop (Legion, EOCL, Ukraine).”
BMO’s Thanos Moschopoulos cut his target to US$32 from US$33, keeping a “market perform” rating.
“We remain Market Perform on MAXR and have modestly trimmed our FY2022/23 estimates following Q1/22 results — which were below consensus due to deal timing within the EI segment, while management reiterated FY2022 guidance, despite an incremental delay in Legion,” he said. “We believe the stock is looking more attractive as Legion draws nearer (particularly given the strong demand backdrop for satellite imagery), but would like better comfort on MAXR’s ability to replenish the Space Infrastructure backlog as we look towards FY2023.”