Investment sentiment remains strong for MDA Space, a prominent player in the Canadian space technology sector. On October 24, Brian Madden, Chief Investment Officer at First Avenue Investment Counsel, expressed his optimism regarding MDA during an interview on BNN Bloomberg’s Market Call. This upbeat outlook comes despite MDA’s recent loss of the EchoStar contract.
Recent Developments and Strategic Moves
Madden highlighted that his firm viewed the setback as a strategic buying opportunity. He stated, “We bought it on that dip when they lost the EchoStar contract.” The investment team has been observing MDA since May and capitalized on the recent market fluctuations.
Madden credited their summer intern, Michael Cermatiero, for comprehensive research on MDA, underscoring the firm’s diligent evaluation before the purchase. MDA Space has experienced significant commercial activity, dominating the low-earth orbit satellite manufacturing realm for 55 years, even though it relaunched publicly only a few years ago after private equity ownership.
Growth Prospects in the Space Economy
The global space sector is booming with an estimated value of $1.5 trillion. MDA is strategically positioned to benefit from both the telecommunications and defense markets. Madden pointed out that federal funding may further enhance opportunities within the defense segment.
- Telecommunications and mobility market growth.
- Rising federal funding in defense sector.
Order Backlog and Revenue Growth
MDA’s promising growth trajectory is supported by a rapidly expanding order backlog. The backlog currently stands at just under five, with an impressive compounded annual growth rate of 54% since 2020. Management anticipates a revenue increase of 25% to 30% in the following years, fueled by their substantial $20 billion order pipeline.
Valuation and Analyst Sentiment
Madden asserts that MDA’s valuation is reasonable, especially given its growth potential. Currently, the stock is trading at approximately 12 times enterprise value to EBITDA. Over the past year, MDA shares have surged by 67.08% and by 151.5% over five years. The consensus among analysts is favorable, with seven recommending it as a “Buy” and one as a “Hold.” There are no “Sell” ratings for the stock, which had a consensus price target of $43.56 as of October 28. The shares closed at $34.17.
In conclusion, MDA Space’s robust order backlog, strategic positioning in the burgeoning space economy, and favorable analyst ratings contribute to a compelling investment case despite recent challenges. This sentiment reinforces an optimistic outlook for the company’s future.
