Should you sell your MDA Space stock?

Desjardins Securities analyst Benoit Poirier cut his target for MDA Space (MDA Space Stock Quote, Chart, News, Analysts, Financials TSX:MDA) to $43 from $56 after the company lost a $1.8-billion satellite contract with U.S. telecom EchoStar Corp., but reiterated a “Buy” rating, calling the market’s sharp reaction overdone.

Shares of the Brampton, Ont.-based space technology firm fell more than 25% on Sept. 8 following EchoStar’s premarket cancellation.

The termination was tied to a sudden change in EchoStar’s business strategy in the wake of spectrum allocation discussions with the U.S. Federal Communications Commission. EchoStar said it has agreed to sell its AWS-4 and H-block spectrum licenses to SpaceX.

As reported by The Globe and Mail, Poirier said the development reflects political dynamics involving Elon Musk’s company rather than any weakness in MDA’s business.

“The decision appears politically driven, with EchoStar now being viewed as a public proxy for SpaceX,” he said. “The satellite market is large and diverse and will not be ‘winner takes all’, making a Starlink monopoly unlikely.”

Management told investors the termination will be financially neutral. MDA expects to be fully compensated for costs and fees under the contract by year-end, with no prolonged legal dispute anticipated. Poirier noted the work already completed helped accelerate a 5G-compliant satellite design that strengthens the company’s Aurora direct-to-device offering.

He added that MDA’s constellation pipeline remains steady at $13-billion, with another potential award expected within 12 months.

“Many investors regret missing MDA’s rally,” Poirier said. “We see [the stock’s] pullback as a compelling entry point, with long-term industry tailwinds intact.”

The average Street target is $43.86, according to LSEG data.

-30-