About a year ago, I was cautiously recommending Maxar Technologies (TSX:MAXR)(NYSE:MAXR). At the time, the stock was being pounded into submission due to high debt, bad luck, and a number of other issues. The stock was sitting at $10 a share, and I was buying up small amounts of the stock.
It was tough to dive into considering all the potential risks, but I was reasonably certain that a lot of the bad news was baked in. It was certainly possible that it could have continued to go down, but in my mind, it was worth the risk.
What a difference a year makes. Even though Maxar is still sitting at a low level relative to its highs, it has made a lot of headway. The stock is, in fact, up about 140% since I wrote about it in July of this year and could have a long way yet to run.
Many of the concerns that have plagued the company have been ironed out to varying degrees, bringing investors back to the stock. The satellite failure which plagued the stock has now been resolved, with the cost of the satellite being recovered.
The company has also made some headway on the business front, notably securing a partnership with NASA to get humanity back to the moon. This partnership cements its leadership as a space-focused company and adds legitimacy to its name.
It’s other business areas, such as satellite imagery and space robotics, also provide revenues and growth to the company. The combination of these businesses makes Maxar a great stock to hold if you are looking to participate in our journey to the stars.
Some problems still remain
The company is not perfect, of course, and still possess risks. These risks are not as dire as they once were, with the Worldview 4 Satellite problem largely behind it, but the remaining issues are still worth considering.
It’s debt levels are, of course, the most significant issue that still faces the company. Maxar had over US$3 billion in long-term debt as of its Q3 2019 report, which is pretty hefty on a market capitalization that sits around $1 billion at the time of this writing.
It also does not have much of a dividend after slashing it to only US$0.04 a share. This was a very good move on the part of management to conserve capital and pay down debt, so I don’t fault them for making the decision to reduce the payout. That being said, income-focused investors will likely not be blown away by a yield of only about 0.32% at the current price.
This stock is still a buy
Even though the stock has had a pretty significant run up, you could be pretty comfortable buying at these levels, as long as you are looking to be a long-term investor in the space technology company. This stock has proven to be enormously volatile, so you might be in for a ride resembling the re-entry of a space capsule, which I assume is pretty bumpy.
Nevertheless, any space enthusiast or forward-thinking investor would do well to own some shares of this stock. There is a good chance it will pull back yet, so buy half of your desired purchase today and average down if it pulls back significantly.
Don’t put all your money into this stock, since it is still a far cry from a safe play. But it will likely pay off in the long run, as Maxar continues to pick up contracts and humanity moves forward with its move into space.
