What happened
Space stock Maxar Technologies (NYSE: MAXR) had a banner day on Monday, surging in early trading and closing 10.4% higher for the day -- apparently on no news at all.
So...why did it do that?
Image source: Getty Images.
So what
I've searched high and low, and there seems to be no clear explanation. No analyst upgrades. No price target hikes. No new NASA contracts. Nor any positive press releases from the company itself today, that might explain Maxar's sudden popularity.
Except that...its popularity isn't really all that sudden. Fact is, Maxar Technologies shares have risen steadily over each of the last three trading days. Or, to put it another way, ever since the company announced that it's completed its previously announced "sale and leaseback" of its Palo Alto real estate, generating $291 million in gross proceeds -- and that it intends to use these proceeds entirely to pay down its debts.
Now what
That's a positive development for Maxar, to be sure. Still, $3.4 billion of its nearly $4 billion enterprise value is made up of debt. Even if Maxar got to keep all $291 million from its real estate sale (a certain percentage will certainly be eaten up by transaction fees), and apply it to its debt, that wouldn't cover even a tenth of its outstanding obligations.
What Maxar really needs to do at this point is get its free cash flow machine back in order, and begin generating cash it can use to tackle its mounting debts. Problem is, according to analysts polled by S&P Global Market Intelligence, Maxar was FCF-negative last year, is expected to remain so this year -- and will burn even more cash next year.
Unless there's some other news floating around out there to explain today's rally, the sudden 10% rise in Maxar's stock price might be a good excuse for investors to sell out of this stock, and wait to reenter after the company gets its cash engine fixed.
10 stocks we like better than Maxar Technologies Ltd.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Maxar Technologies Ltd. wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of December 1, 2019
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
