Maxar Technologies (MAXR) share prices currently fall in line with the market dip at around 20% lower from this time last year, putting it right on pace with the S&P 500 average, but the company remains a solid performer with increasing revenues. The satellite manufacturer gained even greater relevance this year when its global intelligence arm saw use by the Pentagon and agencies worldwide as Russian's invasion of Ukraine and instability in Eastern Europe took center stage.
Combining satellite manufacture and global intelligence
Maxar's strength comes primarily in its ability to both manufacture new satellites and deliver intelligence with proprietary systems both on the hardware and software side of operations. Its intelligence side actually drives nearly 60% greater revenues than manufacturing alone, falling in at an annualized expectation of $1.17 billion versus $735 million, respectively. This gives the company a strong competitive edge and allows it to pair the two elements for sales to major global organizations and initiatives, including the Pentagon and Google Maps from Alphabet.
The company has not yet gained profitability, and a look at its liquidity shows a total of $341 million available. This total includes $326 million in revolving accounts ($500 million total debt capacity minus current borrowings as well as undrawn or outstanding leters of credit) and $15 million as cash on hand. Strong liquidity helps ensure its continued growth and operation. The company managed positive bottom lines on earnings reports previously, with a net income of $45 million in the second quarter of 2021, but a full year of profitability remains out of reach, and the most recent quarterly loss came in at $30 million.
Continual strength and new developments
The company continues to grow and develop new initiatives that should drive profitability over time. Maxar recently announced that it expects its Worldview Legion satellite system to deploy in the fourth quarter of this year. The latest iteration of its integrated solution systems brings with it a new suite of hardware and software developments to further the company's Earth intelligence priorities. The upgrade also promises to enhance Maxar's ability to deliver information with even greater accuracy and precision.
These new developments come on the heels of continued investment in products and an improved internal go-to-market strategy. The company seeks to diversify the products it offers as well as its client portfolio, gaining greater reach and market share through additional offerings. Bolstering both imagery and intelligence precision further expands Maxar's potential offerings. Giving the organization the ability to deliver the latest weather information as well as tracking potential infrastructure changes. The system can more effectively identify the bulk movement of goods or groups of people on the ground.
Challenges in satellite technology
Maxar's inability to deliver annual profits at this time comes from many of the challenges of developing and deploying new technology. While the company reports massive revenues, the costs of research and development eat deeply into the operating statement. The Q2 report noted increases in costs for enterprise resource planning, marketing, and product strategy. Improvements in these areas can help drive the bottom line and result in greater return on investment internally.
Similarly, Maxar does not deploy its own satellites. Citigroup analysts estimate the average cost of deployment at $1,500 per kilogram. These prices do not include operational expenses or positioning and maintenance concerns. Deployment costs may well come down to Earth in the future, however, as the same report from Citi indicates an expectation of up to 95% cost reduction by 2024, reducing one of the apparent barriers to Maxar's profitability.
In its own quarterly reports, Maxar notes additional challenges. These include geopolitical tensions, the impact of the COVID-19 global pandemic, changes in governmental contracts, and infrastructure or supply disruptions. These elements affect all manufacturing and intelligence organizations, and the company's awareness of these allows for the creation of contingency plans and emergency planning to help mitigate these challenges.
Space represents growth and opportunity
Citigroup anticipates space to become a burgeoning industry over the next two decades, with revenues at or beyond $1 trillion. That includes, and requires, an average 20% compounding growth per year, making space itself a major growth industry. With expenses potentially reduced due to investment in internal systems and strategies as well as the costs associated with deployment likely to fall over time, Maxar should move closer to profitability over time.
In an ever-changing technology landscape, diversification remains crucial. Few companies can put their proverbial eggs in one basket, and Maxar offers both the tools and expertise needed to make the most of its products and services. It enjoys a position of strength as the world plunges headlong into the future, a position that makes it one of the top space stocks to buy during the current dip.
