Maxar Technologies (NYSE: MAXR) stock soared between February and April but has since plummeted. Does this space tech company have a promising growth trajectory ahead?
What Does Maxar Technologies Do?
According to Bloomberg, Maxar Technologies Inc. provides satellite telecommunication services. The company offers ground infrastructure, earth observation, on-orbit assembly, and analysis solutions. Maxar Technologies serves customers in the United States.
The company has two divisions. Earth Intelligence captures and analyses images from space and provides many publications with pictures taken by satellites and drones.
Maxar also provides media outlets with evidence of the horrors of war, such as satellite images showing bodies on the streets of Ukraine.
Satellite images have an influential role to play in society today. Many want to use the data for the good of humanity. For instance:
to quantify and combat the effects of climate change
to document and highlight human rights abuses
disrupt unlawful trade networks
document and monitor logistical movements in war and conflict
This data is clearly needed, but its money-spinning potential is harder to calculate.
Meanwhile, Maxar's Space Infrastructure division designs, builds, integrates, and tests space-based communication satellites. These are based in low earth (LEO) and geostationary orbit (GEO).
As a provider of comprehensive space solutions and geospatial intelligence, the company maintains strong relations with the US government and intelligence departments.
Maxar also serves companies in mining, telecommunications, mobility and logistics, environmental, and satellite communications industries.
In September, the company renewed its contract with the US National Geospatial-Intelligence Agency for the Global Enhanced GEOINT Delivery (G-EGD) program. The agreement, which began September 1, 2022, is valued at $44m and is the third of three option years for the contract, with a total value of up to $176m.
With the award of the contract, Maxar will continue providing more than 400,000 US government users with unclassified, online, and offline, on-demand access to high-resolution commercial imagery.
The company is also launching WorldView Legion, its next-generation Earth-imaging satellites, which are being deployed this year. These satellites offer more frequent monitoring and enhanced mapping for improved emergency response support, maritime surveillance, infrastructure and other remote monitoring needs.
Maxar says the best 3D models of the planet will be fueled by WorldView Legion.
Some believe that companies like Maxar should give away free access to its older satellite image collections to help make the world a better place. But as it's never been done before, it's hard to predict the repercussions of such a move and, indeed, the hosting costs.
The company already provides free access to humanitarian and environmental organizations through its web-based SecureWatch platform. Maxar hosts its satellite images on Amazon Web Services (AWS).
How Does Maxar Technologies Make Money?
Maxar Technologies makes money from both its divisions. In Earth Intelligence, Maxar makes money selling access to its database of satellite images, which comes with solid margins.
In Space Infrastructure, it continues to generate healthy margins through its government contracts. Unfortunately, Q2 saw a decline in Space Infrastructure product revenues.
Maxar Earnings Update
Maxar Technologies (MAXR) reported its last quarterly earnings on August 9, 2022, after the market closed. Highlights in Q2 include:
Consolidated revenues of $438m
Net loss of $30m, inclusive of a $53m loss on debt extinguishment
Diluted net loss per share of $0.41
Adjusted EBITDA of $119m (non-GAAP)
Operating cash flows of $67m
Awarded a 10-year contract worth up to $3.24bn as part of the Electro-Optical Commercial Layer Program
Refinanced its Credit Facility with new maturities in 2027 and 2029, retired its 2023 Notes and issued new 7.75% Notes due 2027
Maxar is expected to report Q3 results on November 2. FactSet analyst estimates provide an EPS consensus of $0.34 and a sales consensus of $456m.
MAXR Stock Financial Overview
Over the past year, Maxar Technologies stock has traded between $17.51 and $40.48. Today it trades at around $20.59. Year-to-date, the MAXR share price is down by -31.8%, while the S&P 500 is down -24.12% over the same period.
The Maxar Technologies share price is up 17.59% from its 52-week low and down by -49.14% from its 52-week high.
MAXR stock has a price-to-earnings ratio (P/E) of 38.06. Its price-to-book-value (P/BV) is 1.05, which is well below the industry benchmark of 5.2. MAXR stock comes with a dividend yield of 0.19%.
A stock with a beta higher than 1.0 is expected to be more volatile than the S&P 500. MAXR stock has a 52-week beta of 1.73, which accurately reflects its volatile nature.
Maxar Technologies' market cap is $1.5bn. The company's debt-to-equity ratio (D/E) is 1.53. This gives an idea of the company's financial leverage, which is relatively high.
FactSet analysts have a consensus Overweight rating on MAXR stock with a target share price of $38.69.
Maxar Technologies Growth Potential
In Q2, Maxar President and CEO Dan Jablonsky noted they are making solid progress on the company's strategic growth plans.
Maxar's Earth Intelligence segment has diversified bookings across the United States government, international allies, and enterprise customers.
Being awarded the Electro-Optical Commercial Layer Program provides the company with great revenue visibility over the next decade. It also offers multiple paths for growth across its diversified customer base in the years ahead.
In Maxar's Space Infrastructure business, the team is seeing momentum and growth opportunities as it executes its customer and product diversification strategy for national defense, commercial and civil missions.
Risks to MAXR stock
The MAXR share price will likely suffer if any of the US government contracts are not renewed.
Satellite images are in higher demand during periods of war, but if peace is restored, demand may come down.
The company is heavily indebted, and interest rates are going up, making its debt more expensive to service.
Maxar faces rising competition with BlackSky (NYSE: BKSY), Skywatch, EOS, and Planet Labs PBC (NYSE: PL), providing geospatial intelligence and earth imaging.
The short-interest ratio gives an investor an idea of how heavily a stock is being shorted. MAXR stock has a short ratio of 8.76 (also known as days to cover). This indicates bearish sentiment.
Maxar's chief financial officer (CFO), Biggs Porter, plans to retire next year, and this news caused the MAXR share price to fall. The company is now looking for a replacement CFO. Porter will remain in his current role until the new CFO is named and then assist with the transition as a consultant until March 2024.
ETF Comparison
To benchmark the recent success of the aerospace and defense market, we can look at an ETF running in the space. For instance, the iShares US Aerospace & Defense ETF (ITA) or the SPDR S&P Aerospace & Defense ETF (XAR).
The top twenty holdings in both ITA and XAR ETFs include:
Northrop Grumman
Axon Enterprise
Huntington Ingalls
Curtiss Wright
General Dynamics
Bwx Technologies
Lockheed Martin
Raytheon Technologies
L3Harris Technologies
Heico
Mercury Systems
Textron
Aerojet Rocketdyne Holdings
Howmet Aerospace
Hexcel
Woodward
Transdigm Group
Spirit Aerosystems Holdings
Boeing
Virgin Galactic Holdings
ITA has $4bn in assets under management, and year-to-date, the fund is down -6.6%.
XAR has $1bn in assets under management, and year-to-date, the fund is down -17.2%.
Both ITA and XAR have reduced their exposure to MAXR stock over the past six months, although they still hold MAXR shares.
How Much MXR Stock Does the CEO And Other Management Own?
Key members of the Maxar Technologies leadership team own stock in the company.
CEO Daniel Jablonsky owns 0.69% of the company.
CFO Biggs Porter owns 0.49%.
Executive VP and CTO Dr. Walter Scott owns 0.48% of MAXR stock.
Executive VP and General Manager of Public Sector Earth Intelligence, Tony Frazier owns 0.28%
Senior VP and Chief Internal Operations Officer Jeff Robertson/Digitalglobe owns 0.18%
Meanwhile, according to FactSet, institutional ownership stands at 48%.
Is MAXR Stock a Good Investment?
The core business is strong, and Maxar images are now commonplace in blogs, newsletters, and media publications all over the world. However, inflation and rate hikes have been hitting costs while product revenues have slowed.
The MAXR share price is down heavily year-to-date, but the stock may still be overvalued, going by its high P/E.
Last year, the company reported annual sales of $1.77bn. Full-year guidance for this year includes total revenue of between $1.8bn and $1.85bn and total adjusted EBITDA of $455m to $505m.
Maxar's recent US government contract extensions are reassuring, and there is a lot to like, but with the financial markets still in turmoil, this may be one to watch from the sidelines for now.