Maxar Technologies Ltd.
(MAXR-N, MAXR-T) US$28.56 | C$36.40
Q2/22; Debt Refinancing & In-line Quarter Support Upside Event
After market close on August 9, Maxar reported Q2/22 Adjusted EBITDA of $119 million versus TD/consensus of $122 million/$118 million.
Impact: NEUTRAL
We are maintaining our BUY recommendation and decreasing our target to $43.00 from $44.00. The decrease to our target is due to the net impact of slightly lower Earth Intelligence (EI) forecast adjusted EBITDA, due to updated risk adjustments to our WVL constellation revenue estimates, partially offset by a shift forward in our valuation period by one quarter and higher Space Infrastructure forecast adjusted EBITDA. Our EPS estimates increase due to the impact of lower forecast D&A based on company guidance and other factors. While there were adjustments lower to operating cash flow guidance and the launch of WVL, we don't view these impacts as material to Maxar's long-term potential equity value.
We believe that Maxar's equity market valuation continues to reflect excessive risk to the company delivering on its 2022 and longer-term financial targets. With each successive quarter in which the company delivers results that are in line with the company's plans and consensus expectations, we believe that the risk to long-term execution is reduced and the case for multiple expansion strengthened.
Although there was another small delay in the launch of the first WVL satellites, the magnitude of delays are shrinking, launch risks are being retired and the launch date is moving closer. We believe that initiatives aimed at reducing the time between launch and revenue generation, Maxar's backlog of $2.225 billion and U.S. government contracts will offset the financial impacts of the launch delay on late-2022 and 2023 revenue and EBITDA. The lower 2022 operating cash flow guidance is related to debt refinancing (next maturity in 2027) and the rising interest rate environment and do not reflect any company-specific factors.
TD Investment Conclusion
We believe that investors who appreciate a turnaround story with limited pandemic and economic exposure, and space-investment-driven growth potential should increase their exposure to Maxar. Although we acknowledge the risks, which are dissipating, in our view, we believe that investors are compensated for the risk by the current valuation and other positive investment attributes of Maxar.