Satellites on the fritz may be the concern-of-the-moment for Maxar Technologies (Maxar Technologies TSX, NYSE:MAXR), but the company’s unwieldy debt load is the glaring red flag, says Jamie Murray, head of research for the Murray Wealth Group, who claims that a turnaround could be a while in coming.
“They have a lot of debt, and it’s going to be a long road out of here,” says Murray to BNN Bloomberg on Tuesday. “Their market is being displaced by companies that are making smaller, cheaper satellites and getting them up into space faster.”
“It’s going to be a long turnaround,” he says. “There probably is value in the shares but there’s a very large debt component to the company as well. So it’s one that we wouldn’t be looking at right now.”
Maxar’s share price has gained back a little ground over the past month, climbing from a low of C$6.32 on January 21 to where it now trades in the mid-C$9.00 range. But that’s still a long way from the high C$70.00 peak it hit last July. The stock has suffered in tandem with the company, which last year dealt with a trouble on a number of fronts, including a short-seller attack, a write-down of its satellite business and, early in 2019, a permanent failure in an image-generating satellite that was pegged to be one its prime revenue generators and, finally, the quick departure of its CEO.
All that has been enough to drag the stock through the mud, while the company’s the long-term debt load, at $3.1 billion as of Maxar’s last quarterly report, is a glaring issue. (All figures in US dollars unless noted otherwise.)
“Maxar has been a tough performer for the last year and it has been compounded over the last month or two,” says Murray. “They really lost on that [satellite] investment. They got some insurance money but they lost out on all the contracted revenues that the satellite would’ve provided.”
“That’s just been one more kick in the teeth for Maxar shareholders,” he says.
Ahead of Maxar’s fourth quarter financials due on Thursday, the company last reported on October 31, posting a net loss of $432.5 million on revenues of $508.2 million, with Maxar’s GEO Communications segment showing a 31-per-cent year-over-year decline in revenue.