Markets

Why Maxar Technologies Stock Popped 12% This Morning

What happened

Canadian-American space-tech company Maxar Technologies (NYSE: MAXR) is starting the day off right today, with its shares up 12.4% as of 10:55 a.m. EDT.

For that, you can thank the friendly analysts at J.P. Morgan.

Chalk drawing on blackboard showing risk and reward balanced on a set of scales

Image source: Getty Images.

So what

Early this morning, J.P. Morgan initiated coverage of Maxar stock with an overweight rating (for stocks, that's a compliment) and a $12 price target, calling the company "high-risk/high-reward," according to a write-up today on StreetInsider.com.

Maxar, says J.P. Morgan, is currently in the early stages of a turnaround effort that could take as long as the next 24 months to play out. If it succeeds in winning new contracts and replacing lost revenue from its defunct WorldView-4 imaging satellite, however, the company could see its debt leverage come down and its equity value go up.  

Now what

Key to this happy scenario playing out, argues the analyst, is Maxar's focus on paying down its debt. And in order for that to happen, the company needs to generate positive free cash flow.

In that regard, Maxar has in fact been free cash flow positive over the past 12 months, but analysts are forecasting it will end this year in the red, and burn cash again in 2020. J.P. Morgan, like other analysts polled by S&P Global Market Intelligence, is looking for a return to positive free cash flow by 2021.

Fingers crossed.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Maxar Technologies Ltd. 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.

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