Shares of satellite builder and satellite photography company Maxar Technologies (NYSE:MAXR) jumped 18% in Friday trading, ahead of Memorial Day weekend. Today, on traders' first day back from the holiday, Maxar stock was rocking again, up 17.4% at the close.
Last week, I theorized that Maxar stock was responding to rising excitement over SpaceX's imminent launch of a manned Crew Dragon space capsule to the International Space Station Wednesday, the first time the company has ever carried astronauts on a space mission, and indeed, the first time any private company has attempted such a feat.
That theory holds true again today. Less than 24 hours before the launch attempt, it's logical to assume that with the publicity this event receives, investors will soon be hunting around in search of space stocks to invest in. What they'll find, as I discussed last week, is that aside from Maxar, there aren't a lot of publicly traded space stocks to choose from. SpaceX, for example, is not publicly traded, but Maxar is, and that could boost investor interest in the stock.
And there's another reason Maxar stock could be going up. As one alert reader pointed out last week, the Trump Administration is threatening to pull out of the Open Skies Treaty that permits the U.S. and 34 other nations, including Russia, to overfly one another's territory with airplanes to perform reconnaissance on military activities on the ground. If this happens, then not only will countries such as Russia (which has been criticized for violating the spirit of the treaty) lose U.S. overflight rights, but the U.S. itself will find its ability to monitor Russian activities curtailed.
Such a development could increase demand for satellite surveillance of Russia as an alternative to aerial overflight. With Maxar deriving 65% of its annual revenue (and all of its annual profits, according to data provided by S&P Global Market Intelligence) from satellite photography, this would obviously be a boon for its business.
The U.S. cannot actually pull out of the treaty until six months after it has given notice of its intention to do so. This means that investors may need to wait a couple of quarters for Open Skies-related revenue to begin pouring into Maxar. Still, between the SpaceX launch and the Open Skies news, investors now have both short-term and long-term reasons to be optimistic about Maxar stock.
And that gives two great reasons for this defense stock to be going up today.