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MDA is undervalued, RBC says

RBC Capital Markets analyst Ken Herbert likes what he sees from MDA Space (MDA Space Stock Quote, Chart, News, Analysts, Financials TSX:MDA).

As reported by the Globe and Mail, the analyst June 24 maintained his “Outperform” rating and price target of $16.00 on MDA.

“We believe investor sentiment should benefit from several tailwinds, including improving 2025-2026 top-line visibility, increasing confidence in execution, visibility on peak capex, and strong industry fundamentals,” Herbert wrote.

The analyst broke down where MDA is at with regards to efficiency.

“The primary satellite facility is undergoing a substantial expansion, and the level of automation provided incremental confidence in the margin outlook,” Herbert wrote. “Management remains confident on incremental new business as well as the potential for the expansion of the Telesat and Globalstar contracts. As the focus for investors shifts from top-line to margin and execution, the expanding satellite facility supports a bullish view, in our view.”

Herbert said investors may begin to see the fruits of the company’s labours later this year.

“In 2H24, the company expects to be in a position to announce the next production phase of the Canadarm3 program, as well as to identify the customer for its Authorization to Proceed (ATP) contract,” Herbert said. “The outlook for new satellite contract announcements remains on track, expected in 1H25. The level of automation in the facility is impressive. MDA outlined a learning curve for the Aurora satellites, targeted a 60-per-cent reduction in production hours from satellite 1 to satellite 200. We believe investor confidence in the long-term high-teens margin potential is important for continued stock multiple expansion.”

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