Maxar Technologies may be dirt cheap but the prudent investor should wait and see what direction the new CEO plans to take the company, says Christine Poole of GlobeInvest Capital Management.
By any account, Maxar’s decline over the past year has been dramatic (throw in your space metaphors here —falling out of orbit?) For the former MacDonald, Dettwiler and Associates, 2018 saw a write down in its satellite business, a short-seller attack involving allegations of inflated earnings resting on questionable accounting, then, in January, a permanent technical failure in one of its main revenue-generating satellites, followed up by the abrupt departure and replacement of its CEO. All of which has crushed the company’s share price, which has now lost 89 per cent of its value over the past 12 months.
Poole says the carnage doesn’t translate into a buying opportunity. Not yet, at least.
“I’m not sure it’s oversold. This company has obviously gone through a lot of change and you’ve seen a very negative price reaction to these events,” says Poole CEO and managing director at GlobeInvest Capital, to BNN Bloomberg on Wednesday.
“We had owned this company many years ago and one of the primary reasons why we sold it was because their satellite business was actually slowing, and that was the starting point,” she says. “It became more pronounced and you started seeing it in their operating results. The number of satellites built every year was declining and meanwhile they had expanded capacity in that market right at the wrong time.”
Maxar will release its fourth quarter financials on Thursday, February 28. In its third quarter, delivered on October 31, 2018, the company posted a net loss of $432.5 million on revenue of $508.2 million. It’s GEO Communications segment took much of the blame, with its revenue down 31 per cent compared to a year earlier.
At the time, then-CEO Howard Lance said that one of the company’s priorities would be about “improving cash generation with a priority to pay down debt balances and reduce leverage.” Last month, Lance resigned on January 14 and was immediately replaced by the president of Maxar’s DigitalGlobe division, Daniel Jablonsky.
Poole says that Jablonsky’s stamp on the company could prove pivotal.
“Going forward, I don’t have a good sense of what the earnings capability of this company is so I don’t really have a lot of confidence in the earnings numbers that some of the analysts have,” says Poole. “So, even though the stock price has come down quite a bit, you want to wait until the new CEO presents his business plan and vision for the company.”