Don't show againGeoEye Nabs Another NGA Contract; Also Now on Google Maps
We have a couple of interesting developments with PeakStocks.com portfolio recommendation GeoEye, Inc. (Nasdaq: GEOY), a provider of space-based and aerial imagery and geospatial information.
The first bit of news is that GeoEye just nabbed a new contract with the National Geospatial-Intelligence Agency or NGA, to supply geospatial products and related service above and beyond their current backlog and orders pertaining to the GeoEye-1 launch.
GeoEye also reiterated their launch plans for GeoEye-1
The second bit of news comes as a bit of a surprise to many investors: GeoEye’s imagery can now be found on Google maps.
New to the GeoEye story?
- Read my initial buy recommendation here.
- or read about the company’s latest management conference call and earnings release here.
GeoEye to Supply Additional Imagery to NGA
On Wednesday June 4th, GeoEye announced new awards totaling $22 million to supply geospatial products and related services to the National Geospatial-Intelligence Agency (NGA).
These products and services include a significant amount of value-added, imagery-based geospatial-intelligence products including the company’s airport mapping product line.
I contacted management and they confirmed that this imagery will be delivered most likely within the next 12 months, so while this won’t vastly improve GeoEye’s finances in the upcoming quarter, it will add incremental revenue that will allow GeoEye to really execute their business strategy towards revenue diversification.
These products aren’t just straight mapping or imagery products but digitally enhanced and processed imagery that is custom made for NGA’s needs and falls under the “products and services” offerings that further diversifies GeoEye’s revenues away from straight non-processed imagery.
This order from the NGA is in addition to the previously reported backlog that NGA has instituted in anticipation of the launch of GeoEye’s next generation satellite, GeoEye-1.
Imagery processing and production will be performed at GeoEye’s advanced imagery processing centers located in St. Louis, Missouri and Thornton, Colorado.
GeoEye-1
Last month, GeoEye announced an August 22, 2008 launch date for its next-generation, earth-imaging satellite GeoEye-1.
Once launched, GeoEye-1 will be the world’s highest resolution commercial earth-imaging satellite.
In the same press release as the NGA contract, GeoEye also mentioned that the first stage of the United Launch Alliance Delta II launch vehicle has already arrived at Vandenberg Air Force Base in California in preparation for the launch of GeoEye-1.
It looks like things are running smoothly and on time for the successful launch of GeoEye-1
GeoEye’s Images Now on Google
Those with a keen eye for detail have probably noticed that GeoEye’s images are now appearing on Google (Nasdaq: GOOG) these days.
Here’s a screenshot from a search I was running the other day:
Screenshot of Google Maps now showing GeoEye as an image provider.
Notice the little copyright at the bottom of the image with DigitalGlobe (NYSE: DGI), GeoEye’s only US competitor, and GeoEye.
On the last conference call with analysts, management talked about how they were being approached by online websites and portals (they would never name which ones), and that many of these sites were looking to expand their mapping capabilities and stay upgraded with the most recent imagery available.
It’s now clear that Google is one of these portals.
On the same token, once GeoEye launches their next generation satellite, GeoEye-1, it will be the highest resolution satellite available today, and thus will garner a larger market share in this competitive online marketplace, and will eat DigitalGlobe’s lunch when it comes to the online segment that is always looking to get the latest and greatest to stay ahead of the competition.
One other quick note:
Over the last month or so, insiders at GeoEye have purchased 5,000 shares of the company’s stock on the open market, at prices ranging from $16.85-18.94 per share.
1,000 shares were purchased each by the CEO Matthew O’Connell, and CFO Henry Dubois, with the remainder of the shares being purchased by 2 other officers/board members: Mark Brender and Michael F. Horn Sr.
Now, while this really isn’t what I would call convicted buying, it is something.
Let’s put it this way, I would much rather see insider buying than no insider buying, and of course, insider selling.
Bottom Line
We have some nice developments at GeoEye as the company and management team continues to execute their strategy of delivering more value-added services to their clients, and attempt to diversify their revenue stream.
In addition, the continued support of the NGA as well as continued acceptance and penetration of GeoEye’s products and services into the online community further differentiates them from their competitor DigitalGlobe, and secures their place as the top dog in this industry.
Once GeoEye-1 launches, we’ll see these initiatives further propel GeoEye in the latter half of 2008 and especially in 2009.
The recent insider buying, as well as market overreaction and misinterpretation of GeoEye’s last quarterly analyst conference call and earnings release, are clear signals that now is the time to buy GeoEye and start your position for the long term.
Consider this: GeoEye’s market cap is LESS than the total cost of GeoEye-1!
In other words, if you bought every single share of GeoEye right now, you would essentially be getting their entire business for FREE!
I’ll be detailing other valuation metrics in my upcoming research report, but suffice it to say, you aren’t going to be getting GeoEye for any cheaper than it is today for too much longer.
Upcoming catalysts, including the launch of GeoEye-1 as well as the upcoming IPO of GeoEye’s only US competitor DigitalGlobe, and GeoEye’s management team’s continued execution and diversification of the business, make this a critical juncture for investment in GeoEye for new and old investors alike.
Stop waiting on the sidelines, and start a position immediately.
Once GeoEye’s new bird launches, the stock will fly away.
New to the GeoEye story?
- Read my initial buy recommendation here.
- or read about the company’s latest management conference call and earnings release here.
|
*Variables You Should Know About GeoEye, Inc. (Nasdaq: GEOY) |
|
|---|---|
| Current Recommendation: |
BUY |
| The Company: | GeoEye, Inc. provides space-based, and aerial imagery and geospatial information through high-resolution and low-resolution imagery, imagery-derived products, and image processing services to customers worldwide. Its imagery information products enable customers to map, measure, and monitor the earth for intelligence gathering, precision mapping, construction planning, and environmental monitoring applications, among others. |
| Why Buy Now: |
|
| Market Cap: |
$311.28 |
| Revenue (2007): |
$183.76 |
| Cash/Debt: |
$212/ $247 |
| Current Price: | $17.00 |
| Risk Rating (?): | 8 (High) |
| Position Size (?): | 1/2 (5-5-08) |
| Buy Around Price (?): | $22.00 (5-5-08) |
*As of 6-6-08. Except share price, all values in millions.
(3 votes, average: 5 out of 5)
Loading ...
(6) comments to “GeoEye Nabs Another NGA Contract; Also Now on Google Maps”
Leave a Reply
PeakStocks.com welcomes and encourages reader comments. Add your voice to the discussion whether you agree with me or not.
June 10th, 2008 at 9:32 am
Hi Chris! One of the biggest risks we have with GeoEye-1 is another delayed launch or even a failed launch. Even though the launch vehicle has a nearly flawless record, we still must recognize that as a risk. Additionally, the launch date is right in the middle of hurricane season. I’d really like to get into GeoEye, but the stock price will be severely punished with any problems arising from the GeoEye launch.
Do you know the costs involved in a failed or aborted mission?
Your reply would be greatly appreciated!
June 10th, 2008 at 2:07 pm
SmallCapGuru,
Yep, you are correct, that is why the stock has been hammered from $35 per share to the current $18.
If you ask me, the market has already discounted the delayed and possible failed launch of GeoEye-1.
As for the launch being in the middle of hurricane season, the launch will be taking place in California, where weather is a non-issue.
There’s hardly a cloud in the sky in California in the summer, let alone a hurricane. We are safe on that front.
Also remember that the time to get into a stock like this is BEFORE the good news hits and before the launch, not after! Sure you might still get some upside after that, but the easy money will be off the table.
For the downside risk, GeoEye has launch and on-orbit insurance on the launch and satellite for the first year, so they will essentially recoup 100% of their costs, about $250 million should something fail…of course, this will hurt their stock price not because of the lost revenue per se, but because the satellite will now be lost and they will no longer be able to provide the imagery to their customers that we have all been waiting for.
That would significantly impact their share price, and is one of the biggest risks, but also one of the reasons that the shares are on sale right now.
Buy with caution, but also remember that the risk/reward favors us very highly in this instance.
Chris
June 19th, 2008 at 9:02 pm
Chris,
First of all, Do you think Geoeye has buyout potential?
This is simply a “new” technology play that many individuals are not aware of and/or understand the significant benefit on society. I think it is in a simialar situation to that of the Solar Energy plays last year.
The upside is significant. If the market had not crashed earlier this year, this stock may be sitting at 60 with much more room to grow.
I do disagree with your point that it is immune to the recession. The stock got trimmed 30% solely on market conditions earlier this year. (No news, just financial writedowns).
I think many investors misunderstood the conference call, and it was unfairly punished. (Irrational Investors- Do they not realize the launch is months away.)
This stock is a high flyer and can increase 50% in any given day, especially when we approach launch. My target price is 50 in September after the launch, and 65 in December on momentum. The PE is less than 5, it should realistically be sitting around 40 for one of the most explosive growth companies on Wall Street.
Note: If the launch is a failure, this may drop down to the single digits. A new bird cannot be built overnight. (It is either a Grand Slam or a strikeout with this stock).
June 20th, 2008 at 1:39 am
Unmot,
Thanks for the notes.
I’ll address your questions:
- Yes, I believe that GeoEye has a buyout potential…from whom, wow, where do I start? It could come from anywhere, Google, or another online portal included!
Think about this, for Google and their cash hoard (12 BILLION), a purchase like GeoEye would be a drop in the bucket, even at $500 million…
To own the rights to their imagery, and stop competitors from getting the latest imagery from the new satellite, yea, it might be in their interest to do so…I know this is far fetched, but there are other players in the defense and aerospace industry that also might look favorable on GeoEye as a complimentary part of their business, and again, they are so well captialized, it really wouldn’t cost them anything much…
I hope it doesn’t get to this point, I think GeoEye is worth way more independent, but it is something to think about.
The market crash had nothing to do with GeoEye’s stock decline…well maybe a little. It had more to do with the repeated delays of GeoEye-1 launching, and a tax provision that GeoEye had to take that negatively affected earnings in the beginning of the year, compounded with earnings shortfalls as a result of said launch delay.
The recession will not affect a contractor that gets over 50% of its business from the US government, and the remainder from foreign governments that have to pay for imagery to monitor their borders and countries…these aren’t expenses that you can skimp on!
I don’t think the stock will ever appreciate 50% in one day, but it might appreciate 50% in a month or less depending on the launch, etc.
Stay tuned!
Thanks again,
Chris
July 3rd, 2008 at 7:26 pm
Chris,
What is your price target for year end assuming launch is successful?
It sure looks like it not immune to the market downturn. I am really starting to have my doubts.
Do you think the volume is significantly low? When will the big money start to flow into this stock?
August launch date cannot get here soon enough, I think the stock could even go down more on the next earnings report.
Thanks for your time and research,
Unmot
July 3rd, 2008 at 10:57 pm
Unmot,
Unfortunately, I don’t give out price targets like analyst’s do…I think that it is a losers game and ultimately unsuccessful as pinning down a target price for any stock is like playing roulette.
If you compare GeoEye’s results in the last few months or so with the overall market, GeoEye has actually fared better than most stocks.
Remember, we are on a BEAR market, almost 75% of all stocks are down year to date! Think about that…
That means that if you owned 10 stocks, 7-8 of them are DOWN this year! Not matter how wonderful of a stock picker you are, you are losing this year.
At any rate, please be patient with GeoEye. It will take time, and yes their next earnings release might cause the stock to dip further, and allow us to get more shares even cheaper than today’s price!
Hold tight, keep reading my updates, and I’ll stay on top of it.
Chris