Goldman Sachs sees a 45% rally in this space stock

Published Wed, Jun 16 20218:02 AM EDTUpdated Wed, Jun 16 20218:56 AM EDT

Michael Sheetz @in/michaeljsheetz @thesheetztweetz

Goldman Sachs began on Wednesday coverage of space stock Maxar Technologies with a buy rating, seeing a 45% climb for shares in the year ahead. "We think MAXR has a gem business in earth intelligence and a turnaround opportunity in Space Infrastructure," Goldman Sachs analyst Noah Poponak wrote in a note to investors, adding that the firm sees Maxar as a "great long-term opportunity in the space market." Shares of the satellite imagery company rose 2% in premarket trading from its previous close of $35.97. The stock is down nearly 7% this year, but ha smore than doubled over the past 12 months with the company in the midst of a multiyear turnaround . Goldman Sachs has a $52 price target on Maxar shares. Poponak emphasized Maxar's position as the "world leader in high resolution earth imagery." "This is high margin, recurring business, that has compounded cash flows for years. Earth observation data and analytics are increasingly prioritized by government and commercial customers, and the upcoming launch of the Worldview Legion constellation will increase capacity to meet excess demand," Poponak wrote. A key revenue stream for Maxar's earth imagery business is the National Reconnaissance Office, which expects to issue new long-term satellite imagery contracts in the near future. Maxar faces competition from the rise of private companies such as Planet Labs and BlackSky, but Goldman is not concerned about that. "New competitors are coming to this market but we think they are far behind MAXR," Poponak added. Maxar's space infrastructure business "has been loss-making the last several years" due to the decline in the number of orders for large geostationary communications satellites, a market which Poponak pointed out has gone "through a downturn." "That market has now stabilized, with stronger orders in 2020 and a wave of replacement demand coming up," Poponak said. "Further, MAXR is diversifying into Civil and Defense end markets, which would be incremental to the current revenue base and drive meaningful top-line growth, as well as offer greater visibility into sustained profitability." Goldman Sachs believes Maxar's $2.6 billion valuation is "very attractive," with the company giving 2023 earnings targets that Poponak says "may actually be a bit conservative." "We expect continued improvement in financials to drive a re-rating, as overhang from a challenging past cedes to a promising future," Poponak wrote. – CNBC's Michael Bloom contributed to this report. Become a smarter investor with CNBC Pro . Get stock picks, analyst calls, exclusive interviews and access to CNBC TV. Sign up to start a free trial today .

Technicians test solar arrays for a spacecraft.

Maxar

Goldman Sachs began on Wednesday coverage of space stock Maxar Technologies with a buy rating, seeing a 45% climb for shares in the year ahead.

"We think MAXR has a gem business in earth intelligence and a turnaround opportunity in Space Infrastructure," Goldman Sachs analyst Noah Poponak wrote in a note to investors, adding that the firm sees Maxar as a "great long-term opportunity in the space market."

Shares of the satellite imagery company rose 2% in premarket trading from its previous close of $35.97. The stock is down nearly 7% this year, but ha smore than doubled over the past 12 months with the company in the midst of a multiyear turnaround.