MDA earns huge price target raise at BMO

Brampton, Ontario’s MDA Space (MDA Space Stock Quote, Chart, News, Analysts, Financials TSX:MDA) shares jumped more than 18% Friday after announcing a $1.8-billion contract with U.S. telecom firm EchoStar to build over 100 low Earth orbit satellites.

As reported by the Globe and Mail, On August 1, BMO Capital Markets analyst Thanos Moschopoulos responded by significantly raising his financial forecasts and price target, saying the agreement marks a turning point for the Brampton-based company’s long-term growth trajectory.

In a note to clients, Moschopoulos reiterated his “Outperform” rating and lifted his target price to $53.00 from $33.00, well above the Street average of $48.57. He said the EchoStar contract adds meaningful visibility to future revenue and further validates MDA’s Aurora digital payload satellite platform, which three separate LEO constellation operators have now selected.

“MDA continues to have an active pipeline of additional constellation opportunities,” he said, noting that the company’s largely standardized satellite design should allow for economies of scale. Combined with its credibility from three major LEO clients, Moschopoulos said MDA is positioned to remain a leader in the segment.

While the stock has already reacted strongly, he believes there’s still upside, particularly if EchoStar exercises its option to double the initial order.

The initial EchoStar contract covers the design, manufacturing, and testing of more than 100 MDA Aurora satellites. If all contract options are exercised, the total value could rise to around $3.5-billion for a full initial network of over 200 satellites. EchoStar has indicated the potential for future expansion to thousands of satellites to support global direct-to-device 5G services.

“EchoStar is likely to exercise its options to double the initial contract size,” he said, pointing out that the company refers to 200 satellites as the full planned configuration. “Its ability to secure additional financing seems to be the key factor with respect to whether the options are exercised.”

EchoStar is expected to provide further details on funding at the World Space Business Week conference in mid-September.

MDA CEO Mike Greenley said EchoStar’s selection of the company’s Aurora platform highlights both the product’s technical strength and growing demand for direct-to-device satellite solutions.

“EchoStar’s selection of our new MDA Aurora software-defined satellite to meet its demanding technical and business requirements is a testament to the confidence satellite operators have in our deep expertise, our differentiated MDA Aurora product line, and our expanding production capacity,” Greenley said. “This contract also demonstrates our continued market momentum as we strategically position MDA Space to be the prime contractor of choice for satellite operators offering direct-to-device and broadband connectivity.”

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