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Fundamentals Improving, Stock Hammered Anyway - Why Maxar Technologies Is Likely To Present An Attractive Buy When The Market Levels Out

Mar. 10, 2020 8:44 AM ETMaxar Technologies Inc. (MAXR), MAXR:CA41 Comments


  • Maxar Technologies is emerging from a very tough period of restructuring.
  • There's plenty to do yet, but there's light at the end of the tunnel.
  • We believe the business to be on steady footing now, with balance sheet risk kicked a long way down the road.
  • But its recent history means we expect the market to continue to hammer the stock back down.
  • We believe MAXR can be a very attractive buy once the market settles.
  • This idea was discussed in more depth with members of my private investing community, The Fundamentals. Get started today »

DISCLAIMER: This article is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this article is not an offer to sell or buy any securities. Nothing in it is intended to be investment advice and it should not be relied upon to make investment decisions. Cestrian Capital Research Inc or its employees or the author of this article or related persons may have a position in any investments mentioned in this article. Any opinions or probabilities expressed in this report are those of the author as of the article date of publication and are subject to change without notice.


Maxar Technologies (NYSE:MAXR) is one of a small number of pure-play space stocks we cover in our service here on SeekingAlpha. The company is highly leveraged towards growth in the business of space and we believe that's a very good place to be. We think the space industry is in the early stages of a long-run growth curve, and we don't think this is yet fully appreciated by the market at large.

It's fair to say we have been highly critical of MAXR's stock in our work on SA. Our view changed recently as the fundamentals have improved. And we now see an attractive buy coming down the pike as this bearish market is still treating the company as if it were a busted flush.

The company hit a major balance sheet problem towards the end of 2018. The underlying cause of this was an accumulation of excessive debt used to fund the rollup of a series of space-sector companies under the aegis of the former holding company, MacDonald Dettwiler Associates, a Canadian entity. (The best of those acquisitions was the purchase of Digital Globe in 2017, leading to the rebrand

Thanks for reading our note.  If you enjoyed it, try our SA subscription service, The Fundamentals.

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This article was written by

Cestrian Capital Research, Inc. is an independent, SEC-regulated investment research business led by CEO Alex King. Alex is a professional investor with 3 decades of experience. Cestrian specializes in covering growth stocks, index ETFs and index options, long-run investing, swing trading and risk management via hedging.

Alex runs the investing group Learn more.

Analyst’s Disclosure: I am/we are long MAXR, LMT, NOC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

We are long MAXR, LMT and NOC on a personal account basis.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (41)

Cestrian Capital Research profile picture
MDA just completed. Delighted for the company. Stock just cleared a hurdle.
SkiManJamie profile picture
Great news in that it's still early April! This didn't get dragged on.
Cestrian Capital Research profile picture
@SkiManJamie Yes it's early, think it was flagged for Q2/Q3.
The Unaccredited Investor profile picture
Think this puts them in a much better position to win the Telesat contract esp considering Airbus is under pressure?
SkiManJamie profile picture
Douglas Lane (DLA) filed a 13G on March 17th, effective Dec 31, 2019, that they have beneficial ownership of 5.25% of the company. As a refresher, the Tax Preservation Plan threshold is 4.9% if not approved by management..

DLA is an investment firm, don't see them going activist and they're clearly not in the business of a hostile takeover.
SkiManJamie profile picture
Response from IR makes me infer that this does not violate the plan.
Another nice article.. Thnx @Cestrian Capital Research..

Market has not bottom yet.. but it's due for a bounce to correct the charts..

I think tomorrow we will see another red and retest the lows.. but if Spy bounces from there to close 235+.. it means temporary bottom is in.. There could 1trillion $ stimulus deal announced over the weekend (as trump is anxious to get market back up) we will get a temporary bounce towards spy 270 to 275 which will also correct the charts and will suck in enough speculative players.. Then will come the real downside on spy towards 1800 I think.. This will be the time when Aapl and many would release a disappointing earnings with guidance cuts..

This will put Maxr in a trading range of arnd 6.75 to $12 (where its 200 dma is) and all oversold charts would have been corrected.. Now, what happens after with Maxr is anyone's guess.. but in next spy downturn will cause airlines, casinos, hotels, cruise, oil sector to loose their share values and giving a very long opportunity..

Again, we are not where close to bottom in the overall market based on 2008 experience.. Bankruptcies, job cuts so many things are yet to come.. A typical bear market lasts for 12 to 14 months.. which puts us in Mar 2021 to go all in..

I am looking to open a position in Maxr tomorrow arnd $7 if it reaches there or arnd $8 depending on how Mr. market behaves..

Good luck
Cestrian Capital Research profile picture
@Sam1978 Great minds, just placed a Buy order for the open tomorrow (as flagged to our subscribers). Yes think can be volatile but think 8-ish is a good entry for the long term. We'll see.
lol..nice.. this gives me some confidence as I am currently beaten down in SPCE.. hopefully Mar to Apr, it gives a nice bounce..
Cestrian Capital Research profile picture
@Sam1978 Thinking about re-entry on SPCE. Could still get hammered if the market turns red. Definitely going to buy back in just considering when.
SkiManJamie profile picture
Interesting that MAXR's market cap is back to US $500m and it doesn't take an MIT math genius to figure out that's well below the ~700m MDA sale price.

Much of MAXR's move has been due to all asset classes getting whipped around. But there are probably some opportunistic traders trying to drive it down because of all the debt concerns we've seen over the past couple of years. And clearly some are doubting the deal closes, as long as the buyers don't change their minds, this should close.

MAXR remains on my buy list among a select list of other stocks that have been crushed.
Cestrian Capital Research profile picture
@SkiManJamie Thinking about getting back in. It's always possible the deal doesn't close but would be surprised.
SkiManJamie profile picture
I didn't sell a single share, I rode it down again but I've bought more and will buy more.

Compared to a year ago, they've done so much to reduce cost, stabilize the business, win contracts, shore up cash, refinance debt and extend maturities, and positioned to sell MDA to further reduce debt. Even if MDA isn't sold right now, it's not the end of the world. Investors should have higher confidence than a year ago.
Cestrian Capital Research profile picture
@SkiManJamie Went hard to cash a few weeks back. And happy we did so! Now for the hard part, figuring when to allocate more aggressively. Agree all your comments on MAXR.
SkiManJamie profile picture
I chipped away and added a bit more to my MAXR this morning.

The Fed's and other central banks announcement yesterday basically says they are flooding the banking system with cash and we want the cash to get out (they eliminated the reserve requirements for banks which is removing the safety net designed to prevent bank failures). So the banks funding the purchase of MDA will have the cash and have the incentive to fund it. The question is if the buyers crap their pants and back out. Certainly I'd like to see them reduce debt by another $700m but even if it falls apart, they're not on the ropes, they have liquidity, they have cash coming in (as opposed to airlines who do not have cash coming in), WV Legion should still launch early next year, etc. This of course is all a caveat that the economy holds and we don't have mass layoffs so the cash in the banks has to get out and fiscal stimulus needs to step up to prevent mass layoffs and defaults. None of those issues are unique to MAXR.
Cestrian Capital Research profile picture
@SkiManJamie The company believes the MDA transaction will complete and we have seen nothing to suggest otherwise. It's possible the NASA budget is affected by changing government priorities but again no news on that front right now. We remain on the sidelines on MAXR but that's solely a market call, there's every chance the stock could be a good long term bet at this level. We prefer to see the market level out before buying individual names but then we're cautious by nature and a more risk-taking attitude could well prove smarter. Agree few if any MAXR specific issues here.
SkiManJamie profile picture
I believe it will complete as well but it's important to remember that in a situation like this, things are very fluid and unpredictable, NOTHING is certain. Companies that had open tenders for shares are cancelling them, partly because their stock prices are significantly lower and partly to preserve cash. The banks won't have a funding problem but prior to the weekend it could have been possible that the banks reneg on their commitment to fund the deal. Again, that risk is now gone. However it's always possible the buyers change their mind, unlikely but possible, for the same reason as canceled tenders, prices are significantly lower (also when you go over Maxar financials, they're not giving up whole lot of EBITDA for $700m). A crisis can change appetites and we're seeing that on a daily basis all over.
Cestrian Capital Research profile picture
@SkiManJamie We've pushed the company on exactly this point. The risk when selling to a private equity firm is partly lenders who can walk away, and partly that it's usual for the purchase agreement to be signed by a shell company, not by the fund itself (the structure is used to optimize tax). The shell company will usually have no assets until the moment prior to the deal completing (whereupon cash will roll into that company from the fund itself) and so any guarantees it might give as regards completing the transaction aren't very strong.
Wowsers, down another 18% today, after a statement saying that COVID-19 is not showing many effects on their business. It's not like the fundamental business has changed enough to cause a 55% drop within two months. This is more likely underwater shorts who have been trying to escape finally getting to draw breath.

No 1. rebound play for when the markets show signs of a (temporary?) reprieve until earnings season. Of course I won't bet the farm, it's never worth it in the long term to be honest.
Cestrian Capital Research profile picture
@TimK123 We went to 100pc cash this morning as flagged to our subscribers ahead of time, as always. (We were very heavily cash anyway, this wasn't a big move, we've been flagging the move to cash to our subscribers for some weeks). But yes our gut is that when the selling stops, MAXR can be a top top pick, because the revenue line is likely to be very much more resilient than most companies and because you won't be paying a very big multiple of that revenue line. Watch this space. Oh and again that wasn't really the point of the press release I suspect. The point we think was to say, you know that CAD$1bn? We're getting it.
bessaff profile picture
Trying to time the market can be a double edged sword. Hopefully you cut more than you bleed.

If China and South Korea are what will happen in Europe and the US, this will be short-lived and should not have a significant long-term impact. We may have seen the bottom or another bounce close to it.

But of course if this causes a worldwide recession that’s a different story, but I don’t see it.
Bass12 profile picture
MAXR: "We literally have no coronavirus risk. All of our business is contracted and we have experienced 0 disruption thus far and don't expect any in the future"

****stock loses 50% of value in two weeks****
Cestrian Capital Research profile picture
@Bass12 Indeed! What that release really said was, "The MDA deal is going to close and we are getting the money". We added on a personal account basis today. Stock was nearly $10 at one point. Last time the stock was $10 the company was in a rather precarious position. Not so today.
PicardMade Off profile picture
Solid, spot on article and for those of us familiar with the CEO, we know he is a quality, focused and stand up Exec.
sts66 profile picture
No reason for anyone not in it right now to buy it with flat revs expected, especially when the hope is a BO in a year or two - on it's own fundamentals, nothing to see here - thanks for putting the tables together.
Cestrian Capital Research profile picture
@sts66 Can't model this or recommend the stock on this basis but gut says the stock will perform well coming off the lows, wherever those lows may be in the coming weeks. It's a very nice stock to trade as @TimK123 below notes.
Yes I view Maxar primarily as a great short-medium term trading stock, although I will keep an eye on the long term prospects too, turnarounds are always good for gains if they are sustained.

I've spent all day putting together a list of bounce-back stocks which I intend to use once the situation looks more positive. Longs go out the window for the moment for me, there are so many overly beaten down stocks which should be good to trade the rebound on, and I don't have confidence where the market will be in 6 months yet - I think it might yoyo around violently until Q3.

Especially good also are companies that had great earnings beats but have been crushed in the market selloff, NVDA, LDOS, EBS, also XPO looks poised for a face ripping rally when the markets are back on track. There's always a risk of virus related disruption though with many companies which could hurt any trades, supply chain problems etc.

If 2500-2600 is breached and remained below for any time, then that could cause severe turbulence, I found out today that those levels would breach the long term trend line of ascending lows since 2008.

If SPCE can be pummeled down some more then I'd be really happy to pick up a long term call or two for 2021 or 2022.

I'm holding mostly puts though right now for the first time ever (I'm not naturally bearish) as I can't see the situation improving markedly within the next few weeks, and think much more chance of it deteriorating significantly as peak-virus approaches despite any efforts to stimulate the economy out of it.
Cestrian Capital Research profile picture
@TimK123 Agree your market view. Think there is going to be any amount of stimulus anyone can think of in an election year but ultimately the real economy is going to continue to suffer and the market is likely to reflect that.
Well it bounced very nicely this morning on the S&P 500 bounce (dare I say dead cat bounce for the markets), so could be a nice play once markets are ready to go higher.
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