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We Are Buying The Maxar Dip


  • MAXR delivered unspectacular earnings on Monday after the close. In and of themselves, just a little dull, not terrible.
  • The earnings call, however, was a lesson in how to not handle weak earnings. And so the selloff began in earnest.
  • 24 hours after earnings, the stock was down 25%. Remarkable.
  • This, we believe, is a dip to be bought. Not because the company is beyond criticism, far from it, but the contrary - because the pressure to deliver for investors is now heaped on the company.
  • We bought in staff accounts during Tuesday and expect to continue to do so on any prolonged weakness. We rate Maxar at Buy.
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Stock Market Crash 2020
Photo by solarseven/iStock via Getty Images

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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, IRDM, ARKX, TWLO.

Business relationship disclosure: See disclaimer text at the top of this article.

Cestrian Capital Research, Inc staff personal account(s) hold long position(s) in MAXR, IRDM, ARKX and TWLO

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 (94)

Guessing this is a reason for the big jump today?
spitblu profile picture
@Randol33 That, paired with the Russell Micro Index announcement (Russell Microcap Index Companies #2,001–4,000), is (in my reading) probably a strong endorsement of the company (See unchained by van halen.)
AOC profile picture
10 Jun. 2021

My take on $MAXR is that they intend to broaden the horizon and reach of the present day digital communication boundaries. Could be perceived as the future world beyond the current "world of cell phones".

A long time ago, Bill Gates had the intention of deploying 300 satelites across the world so that $MSFT could update computers with "patches to windows" and new versions of windows, easily. Wall Street "super-analysts" were furious and questioned how audacious could Bill Gates be with "stupidity". How could you download software into your computers without "floppy disks"? the super-analysts questioned. $MSFT stock price suffered, consequently. Lol.

Such a vision of Bill Gates is history.

$MAXR's adventure into space and their ($MAXR) current programs would be harvested in 5 to 10 years.

Those who can afford to invest on $MAXR for such a period of time, would be happy for getting in early and cheap.



Caveat Emptor! Caveat Venditor!
@AOC Thanks for your perspective. To me, it's all about Legion success and it's more about surveillance than digital communications.

If those birds get into orbit and operate as designed, big money will be running to Maxar...not to help us communicate, but to watch what we're doing.
AOC profile picture
11 Jun. 2021
@Cassidy Run

Some genius would eventually invent how humanity can live their lives in absolute incognito mode. Wearable devices that could distort the magnetic waves around an individual, could forestall the facial recognition, voice recognition and radio waves recognition systems. Lots of scientists are awake and at work at issues bordering on human inter-dependencies and relationships.

I am aware that magnetic waves could erase the human memory and presents health hazards to our welfare but a well modulated magnetic wave that simply distorts the wavelength of the laser beams that picks up our pictorial structures could be implemented and commercialized. Hint: satelite phones are less susceptible to prying than standard/basic phones.

For any company to devote their economic relevance on what all of humanity does, could be overwhelming. Generations after generations are just going to do whatever makes them happy ... such innate exercise of freedom cannot be constrained, ever!

Thanks and cheers!

RickJensen profile picture
"I am aware that magnetic waves could erase the human memory and presents health hazards to our welfare"
--Ever been in an MRI??

Thx for that complete load of gibberish.
RickJensen profile picture
What a difference a day can make.
Down 2% to up 10.5%
@RickJensen In a word... volatile. Like a rocket. My boat is stacked but I hope others picked up some shares at $27.50
Cestrian Capital Research profile picture
@RickJensen Never a dull moment with this one
@Cassidy Run Thanks for all of the great thought leadership on this one. I always believed that the dip was a dramatic over-reaction to information that should have been (and probably was) already priced in when the stock was bouncing around in the $33 to $40 range. I.e., the dip presented a terrific buying opportunity. That theory looks more like fact with every passing day. How such a dramatic over-reaction occurred in the first class is a topic that I will leave to others with more investment experience than I have. But, I bought the dip - and am very glad that I did!
Maxar presenting at BOFA:

ric koehler profile picture
Thanks for your take on Maxar Earnings, Cestrian. Gave me a few insights and kept me smiling in the face of Maxar's Price Disaster. Fortunately, similar to your actions, I sold all but my base holding prior to Earnings, and after the price crash, I increased my position. The 9% price increase on May 6, after bottoming in the $27 range May 5, may have started the upside turn.
Cestrian Capital Research profile picture
@ric koehler A nice set of insider buys reported yesterday too. We may all be in the gutter, but we are looking up at the stars.
@Cestrian Capital Research
The CFO was "requested" to buy the shares after the call.
Zorgo profile picture
Yeah, the market REALLY didn't like the Legion delay and the "steeper ramp up" in 2022. Plus the CEO didn't sound so sure it will happen in Q4 either. The tone...I was listening to the audio and not to conjure "Lie to Me" but he wasn't so sure himself. I did a similar thing to you (a bit worse on execution) but sold with large profit and rebought today on another account, hopefully it goes down a few bucks more on momentum before it settles. I'd like to buy some more.
@Zorgo I was thinking about going the opposite way, selling 1,000 shares that I picked up at $38ish in March and April and waiting 31 days for the wash rule, thinking that then stock price would move sideways or down in that time frame. That would get me a short-term capital loss and the opportunity to buy back in to Maxar -- more shares at a better price point.

I decided to stand pat, for now. I didn't think the cc was stellar by any means but I didn't get the sense that Legion would be delayed for more than 3 months or fatally flawed. Biggs was pretty awful. But then they put their money where their mouth is yesterday and the stock price is up at/over $31. If they come out with a statement about a definitive launch date or strong conviction that Legion has been put through all its ground paces (testing)and is ready to go, I can see the stock shooting back to $40 quickly. In that case, I'd have less in the boat and less leverage. So I'm holding and definitely not selling my $7/share prints.
SkiManJamie profile picture
It's head-scratching that people didn't expect the SXM-7 or the debt extinguishment charges coming, they were effectively communicated in February and March (buying back debt at a premium is going to result in a 1-time charge, it's as certain as death and tax).

Importantly, understanding the nature of the SXM-7 charge, a reversal of the orbital receivable, is not relevant to this quarter's revenue activity. If you strip that out of revenue and punt the EV deferred revenue last year because it was just an accounting entry rather than actual business activity, revenue increased 20% y/y. And EBITDA on the same basis increased 20% y/y.

And I'm not one to hang my hat on EBITDA because of the economic cost of depreciation. However there's a whack of amortized purchased intangibles which are really accounting entries from past acquisition purchase accounting and do not represent future investment replacement. so if you take EBITDA, subtract depreciation, and add back the purchased intangibles, you get a decent economic profit. GAAP has fantastic principles but sometimes its elements miss the bigger picture.

SXM-8 is complete and should be launched soon. Let's hope whatever failed on 7 won't repeat on 8.
Cestrian Capital Research profile picture
@SkiManJamie We would be a lot happier if we knew more about what happened w/7 but nobody seems to want to spill on that one. EBITDA (our own defn of operating income + depr & amort + stock based comp, and unlevered pretax FCF (=EBITDA minus capex minus change in working capital) are the measures we hang our hat on generally and also here specifically. Always good work SkiMan, nice.
SkiManJamie profile picture
@Cestrian Capital Research ya I hear you re knowing the issues with 7 but given what we're seeing from HON and RTX, it's very possible it was a component failure that made it through testing. Unfortunately it happens.. just hopefully not with Legion and the cband sats. I'd expect whatever failed on 7 they will have been more stringent on 8.

And I'm not in any way knocking using EBITDA as a metric, it can have uses.

Thanks and ditto.
RickJensen profile picture
@Cestrian Capital Research
Guys I agree.
But we can't know what happened if they don't know. And I suspect they don't.
As Ski says,
you pretty much have to be dead or ignoring the company for this to be a total surprise. So, I'm writing this off on a bunch of folks that don't have a clue. Both of the issues were plain as the jelly on your nose.

Good start of recovery today.
I say we get a bleed/bump up, next Q we get a slight pop since the bad news was all in here (buy anyone should have expected it). And with Legion not torching, we are off to the races.
(Wish I had cash for yesterday)
CEO and CFO bought the dip.
Cestrian Capital Research profile picture
@WOW - Wolf Of Wallstreet and the cfo had to buy big on account of that i don't know the bookings number gaffe lol
spitblu profile picture
CCR, thanks, I like your writing (I write too, but about totally different stuff, lol.) Here, with Maxar, the word mulligan comes to mind. They've got something coming upon in a couple weeks or so, I think. The summer ought to be OK once this tantrum passes.
Cestrian Capital Research profile picture
@spitblu LOL yep they can claim their mulligan for that earnings call! Thanks for the kind words. What do you write about?
spitblu profile picture
@Cestrian Capital Research Ignore my bad grammar. I'm published in translation, literary stuff, and in education policy (I've got a couple years of training from mathematicians.) I'm here pretty much to listen.
@author: You said, "Jablonsky, Porter and co don't look like losers to us." But handling the call is a bit part of winning (in shareholders'/my view). Think Iacocca, Steve jobs, Lisa Su for winners, Cisco's John Chambers for losers. Looks like you put MAXR mgmt among the losers, when you (correctly!) stated: "The earnings call was a lesson in how to not handle weak earnings. And so the selloff began in earnest."

MAXR is a buy <$20, given its long and arduous road ahead and no proven winners at the helm.
Cestrian Capital Research profile picture
@hksche2000 Even winners have bad days. TTD's CEO once cratered the stock with a badly handled call (back in 2018 from memory).
Great article! I'm buying for sure.
Capital Gains profile picture
I will get in under 25, the overall market wants to go down, Maxr is just one bad day down from 25
Cestrian Capital Research profile picture
@MOMENTUS_2020 You might get that. We have been adding through the drop. Support levels coming up next look like 27, 25, 22. www.tradingview.com/...
Capital Gains profile picture
@Cestrian Capital Research no rush for me, if you believe in Maxr the future is bright but in the short term, there is no need to rush in, in my opinion, the market seems to want to go down in the next few months for different reasons, sell in May and go away, If your have market experience you are familiar with that term
@MOMENTUS_2020 The term ( a trope, really) really doesn't interest me in this situation. I agree that Maxr has a bright future and it's simple -- Legion. I also hold many thousands of shares at an average cost (now) of just under $18. So I'm not selling because it's May.

There will be a Maxr earnings release and cc soon (3-6 months) when DJ & Co. announce a defined launch date and give strong conviction to the fleet's readiness. The stock will start moving up then and likely quite quickly.

If you have a loss, play the wash game, and get in lower, that's a possibility, but realize you might sell at your peril. I wouldn't be surprised if an announcement from Maxr before next ER.

I bought yesterday and today and have limited powder. Enough to buy more, though.
Larry Hall profile picture
Very lyrical write-up. My conclusion from your piece and the news blurbs and the oh-so-lively Talkbacks is that MAXR has a very nice potential upside (I added 10% to my position at 28 yesterday) but is riskier than I thought. At 4% of portfolio I am prepared to play, but not more.
Larry Hall profile picture
@Cestrian Capital Research Comment thread, like this one.
Easily the best writing from the authors I follow on SA.
Thank you for making this enjoyable to read, in addition to the thorough and in depth analysis!
Cestrian Capital Research profile picture
@alidariusali Kind of you to say so. If you like our work, please consider signing up for our free newsletter, 'Cestrian Stocks Bulletin' - here: www.getrevue.co/...
@Cestrian Capital Research subscribed. Thank you!
RickJensen profile picture
28 looks to be the basement.
Wish I had some cash. What an oppo here.
Below $30 and 3 weeks, gets you Alpha.
Teats29 profile picture
@RickJensen agreed. I'm thinking same pattern as November is likely. I had more cash at the time, but still got a small add in at $28. Time to sit back and wait.
RickJensen profile picture
Waiting is easy when you are confident in the fundamentals.
(and it's easier than worrying every 100 seconds)
SilverDollar2014 profile picture
@RickJensen Rick-Can't you sell something to generate some quick cash? Have a Garage Sale this weekend? Maybe pick up a part-time job at the Walmart? How can you have NO cash?
Nice write up. I am going to wait a quarter. I can not get over how bad the call was. Just does not instill a lot of confidence, so I do not see a lot of near term institutional buying to drive it higher. They are going to want to see some improvement.
Cestrian Capital Research profile picture
@bason It was so bad that the top guns had to buy their way to salvation!
Thanks for the analysis. I sold quite a few puts yesterday on no more than some hope and crossed fingers. Adding a little logical validation, will help me resume regular breathing again.
Scott Sacknoff profile picture
Great write-up especially “The Next Chapter”!

As a disclosure, MAXR is a holding in our SPADE Defense Index, which is the underlying benchmark licensed by Invesco for its Aerospace and Defense ETF (NYSE: PPA).
Nice write up and review of current events.

However -43.22% price change since your seekingalpha.com/...

Reminds me of a movie line "What about that little guy, Oh don't worry about that little guy."
Cestrian Capital Research profile picture
@Randol33 Take a look at our ratings since it was $10
@Cestrian Capital Research
Scott adams, "One "oh crap" can erase a thousand attaboys.

Like the movie line said, don't worry about that little guy.
@Randol33 it's a volatile stock. Get used to it.
And way to cherry pick the analyst's coverage to critique one window of time, without gathering all the facts first (like when they first started covering this).
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