Shares of Maxar Technologies (MAXR) got demolished in Monday trading, after the satellite and orbital services company reported that its WorldView-4 digital imaging satellite "experienced a failure in its control moment gyros ... preventing the satellite from collecting imagery due to the loss of an axis of stability."
Maxar stock closed the day down 31.5%.
Explaining the import of the failure, Maxar noted that WorldView-4, which has been in service since late 2016, generates approximately $85 million of Maxar's $2.2 billion in annual revenue through the sale of digital images. That's only a bit less than 4% of the business, though. So even if WorldView-4 turns out to be a total loss -- Maxar says that efforts to "restore satellite functionality" have been "unsuccessful" so far -- a 31.5% decline in share price because of a 4% decrease in the ability to produce revenue may seem like an overreaction.
What's more, Maxar believes it will be able to shift enough of the workload, currently being performed by WorldView-4, to others of its satellites, salvaging perhaps $10 million to $15 million of lost revenue.
Granted, Maxar might also have to write off WorldView-4 if it can't fix the spacecraft. With a book value of $155 million, that would be a big hit to Maxar's earnings -- if it were earning anything; currently, it isn't. On the plus side here, though, there's also the potential for Maxar to make a profit from such a write-off, because it has insured WorldView-4 for $183 million.
While it may seem strange to say it, it looks possible to me that Maxar Technologies could end up making money off this disaster -- and investors who instinctively dumped the stock on today's bad news could regret it.
Check out the latest Maxar Technologies earnings call transcript.