In the middle of a pitched battle with a short-seller, National Bank Financial analyst Richard Tse says Maxar Technologies (Quote, Chart TSX:MAXR, NYSE:MAXR) has big upside.
On August 24, Maxar CEO Howard Lance responded to a report from U.S. hedge fund Spruce Point Capital Management that said the Canadian stock was “Engaging In A Massive M&A Accounting Scheme To Cover Past Problems”. The report concluded that the stock has “up to 100% long-term downside.”
“In response to the accounting claims made in the report, the audit committee of the board of directors undertook a review of the elements of the company’s financial statements and disclosures associated with Spruce Point’s claims and found no material errors in the previously issued financial statements and disclosures under international financial reporting standards,” Lance said in a press release. “The audit committee takes seriously any claims regarding the company’s financial reporting. Specifically, the committee conducted a thorough and independent review that addressed claims made by the hedge fund’s report prior to issuing this response. The audit committee conducted its review with the assistance of external advisers including its independent auditor, KPMG LLP, and independent third party subject matter experts.”
Tse says he sides with the company in the matter.
“We believe the recent attestation by KPMG LLP (Maxar’s auditor) when it comes to financial reporting and yesterday’s NGA announcement are positive with respect to our investment thesis,” the analyst says. “Given the meaningful pullback in the stock price and our unchanged outlook and thesis, we see meaningful upside to our target price despite what is obviously some interim volatility.
In a research “flash” update to clients today, Tse maintained his “Outperform” rating and one-year price target of (U.S.) $60.00 on MAXR, implying a return of 104.5 per cent at the time of publication.