Maxar Technologies (NYSE: MAXR) given up quite a bit of value over the past couple of trading sessions. Ever since news that one of its satellites had experienced an issue, the stock has been on a tear downward. However, there’s a silver lining to this situation, and the bad news may actually turn into good news. Considering the massive declines that the stock has seen as a result of the situation, this may represent a strong opportunity. Today, we’ll talk about:
- The failed satellite and why it might represent an opportunity;
- what we’re seeing from MAXR stock as a result; and
- what we’ll be watching for ahead.
MAXR And The Failed Satellite
As mentioned above, Maxar Technologies has been on a tear downward for the past two trading sessions after the company announced a satellite failure. The company said that its WorldView-4 digital imaging satellite experienced a failure. Unfortunately, its control moment gyros failed, preventing the satellite from collecting imagery due to loss of stability.
That sounds horrible. After all, the satellite generates about $85 million in the sale of images that it collects annually. Not to mention, if the satellite can’t collect images, it’s an expensive piece of equipment that will ultimately be junked. That’s painful. Well, until you dig into the details.
While the WorldView-4 generates about $85 million in annual image sales, it only represents about 4% of the company’s income. Even as a total loss, the massive declines are a major overreaction to the news. Moreover, MAXR said that it plans to shift some of the duties of the WorldView-4 satellite to others in orbit, salvaging between $10 and $15 million in annual sales and cutting into the revenue loss. Even then, the satellite would still be a loss. But we’re not done yet.
The satellite has a book value of $155 million. On the other hand, the company insured it for $183 million. As a result, should the satellite become a junkyard project, the insurance settlement will ultimately cover any losses and may actually prove to generate a profit for the company.
Sure, declines are expected when this type of disaster happens. However, the declines are exaggerated and digging into the details, the issue really isn’t much of an issue at all. So, buying MAXR on the lows now may prove to be a strong move in the long run.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to work in the market is that the news leads to moves. When it comes to Maxar Technologies, the news proved to be negative. While the details of the disaster show a very bright silver lining to the dark cloud, investors seem to be focusing on the negative as can be seen by the continuing and dramatic declines. As is just about always the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (12:12), MAXR is trading at $5.76 per share after a loss of $2.24 per share or 28.00% thus far today.
Stop wasting your time! Start finding winning trades in minutes with Trade Ideas!
What We’ll Be Watching For Ahead
Moving forward, the iWatch Markets team will continue to keep a close eye on MAXR. In particular, we’re interested in following the story surrounding the company’s work to recover losses associated with the WorldView-4 satellite. At the end of the day, we believe that the declines actually represent a compelling opportunity. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
Never Miss The News Again
Do you want real-time, actionable news delivered to your inbox? Join the iWatch Markets mailing list below!