Space stocks Maxar and Virgin Galactic are positioned to surge, Truist says with buy ratings

Published Wed, Mar 17 202110:18 AM EDT

Michael Sheetz @in/michaeljsheetz @thesheetztweetz

Truist began coverage of both Maxar Technologies and Virgin Galactic with buy ratings on Tuesday, calling the former "well positioned" and the latter "uniquely positioned" in the growing space industry. Amid a broader market selloff, shares of Maxar and Virgin Galactic slipped Wednesday morning from their previous closing prices of $43.98 and $32.51, respectively. Maxar has gained more than 12% to begin the year and is up nearly 360% in the last 12 months. Meanwhile, Virgin Galactic is up about 35% to begin the year and has more than doubled in the last year. Maxar's turnaround Truist initiated Maxar with a buy rating and a $59 price target, which implies a gain of more than 20% from the stock's current level. Analyst Michael Ciarmoli says the company is "underfollowed" and is a " vertically integrated space pure-play," ready to capitalize on growth in both the government and private sides of the sector. "We believe the combination of increasing [low earth orbit] satellite demand and increasing global space spending will anchor top line growth, while simultaneously expanding margins, and reducing leverage," Ciarmoli wrote in a note to clients. The company has been steadily restructuring and turning around since CEO Dan Jablonsky took the reins in January 2019. While Maxar expects to bring in about $1.8 billion in revenue in 2021, the company has a substantial debt load of about $2.4 billion. However, Maxar is working through that debt and earlier this week announced a $400 million common stock offering to fund paying down some of the debt that is due in 2023. Virgin Galactic has 'near-term catalysts' Shares of Virgin Galactic have slumped in the past few weeks, after the company announced it does not expect to begin its commercial space tourism service until early 2022 and chairman Chamath Palihapitiya sold his remaining personal stake in the company . Despite multiple delays to Virgin Galactic's testing program, Truist's Ciarmoli sees the company's stock climbing more than 40% to $50 a share due to "several near-term catalysts" as it finishes development. "We believe that as one of the first market entrants, with proprietary technology, vertically integrated operations, and plans for a consumer-oriented experience leveraging the Virgin brand, SPCE is uniquely positioned to capture share in the emerging commercial space tourism industry," Ciarmoli wrote. Truist estimates that Virgin Galactic can capture "at least" half of the global space tourism marketplace by 2030. "SPCE will initially have a dominant market position, which we believe will enable it to capture a significant proportion of [total addressable market] as the industry grows," Ciarmoli said. – CNBC's Michael Bloom contributed to this report.

Technicians test solar arrays for a spacecraft.

Maxar

Amid a broader market selloff, shares of Maxar and Virgin Galactic slipped Wednesday morning from their previous closing prices of $43.98 and $32.51, respectively.

Maxar has gained more than 12% to begin the year and is up nearly 360% in the last 12 months.

Meanwhile, Virgin Galactic is up about 35% to begin the year and has more than doubled in the last year.