Maxar Technologies Stock: Look for Battered Tech Play to Rally

maxar technologies stock
iStock.com/monsitj

Maxar Technologies: Contrarian Mid-Cap Stock Worth a Look After Decline

Finding battered contrarian stocks that are trading near their two-week lows can pay off for aggressive traders willing to assume the risk. A mid-cap technology stock that fits this criterion is Maxar Technologies Ltd (NYSE:MAXR). MAXR stock is down 29% this year and trading 32% off its 52-week high, hence offering a good risk-to-reward ratio.

Maxar Technologies has been growing both organically and via strategic acquisitions but the company needs to deliver some consistency to attract investors.

The global company offers advanced communications and information solutions such as satellites, Earth imagery, geospatial data, and analytics.

MAXR is the kind of stock that could stage a strong rally if it can deliver the consistency the market wants to see.

The MAXR stock chart displays the bullish rounding bottom and the subsequent failure to break above resistance at around $66.00.

Chart courtesy of StockCharts.com

Maxar Technologies stock plummeted to the March lows but rallied. The upward rally was short-lived as MAXR stock tanked and is searching for support at around $44.00.

Maxar Technologies can take a run at resistance at $50.00 to $54.00 with a price objective of over $60.00.

My Bull Case for MAXR Stock

The revenue picture has been lackluster with minimal growth from 2014 to 2017.

Maxar Technologies reported revenue growth of 15.39% in 2014 but has been unable to drive revenues since.

Revenue ($ Billions) Growth
2013 $1.82
2014 $2.1 15.39%
2015 $2.12 0.88%
2016 $2.06 -2.54%
2017 $2.12 2.60%

There is some optimism for 2018 as Maxar Technologies is estimated to grow revenues to $2.26 billion followed by $2.35 billion to $2.53 billion in 2019. (Source: “Maxar Technologies Ltd. (MAXR),” Yahoo! Finance, last accessed August 2, 2018.)

Maxar Technologies has positive earnings before interest, taxes, depreciation, and amortization (EBITDA) with growth in four straight years. The compound annual growth rate (CAGR) from 2013 to 2017 was 12.42%, which is well above the revenue growth rate.

EBITDA ($ Millions) Growth
2013 $233.43
2014 $287.86 23.32%
2015 $288.94 0.37%
2016 $336.13 16.33%
2017 $372.79 10.91%

GAAP diluted EPS has been positive for five straight years but the failure of Maxar Technologies to deliver steady growth has been an issue.

GAAP Diluted EPS
2013 $3.00
2014 $1.31
2015 $3.84
2016 $2.14
2017 $3.15

On an adjusted basis, Maxar Technologies is estimated to earn $4.48 per diluted share in 2018 and as high as $7.20 per diluted share in 2019.

The balance sheet has a high debt load but MAXR is free cash flow (FCF) positive with growth in three straight years.

  Free Cash Flow ($ Millions) Growth
2013 $82.1
2014 ($8.94) -110.88%
2015 $68.45 865.98%
2016 $80.82 18.08%
2017 $151.87 87.91%

Analyst Take

Maxar Technologies needs to deliver steady growth but with the stock price down at these levels, MAXR stock is worth a look.

MAXR stock is trading at a mere 8.52-times its 2019 EPS. If Maxar Technologies can deliver on its high estimate, the forward multiple improves to only 6.38-times, which is attractive for the bargain hunter betting on a turnaround.