Don't show againGeoEye Q3/2008 Earnings Preview: Good News on the Horizon?
What I want to see
Robust Outlook
The most obvious and important thing that I want to see and hear out of GeoEye this quarter, is a robust outlook (even though the company does not provide financial guidance) at least in terms of order flow, and imagery generation capabilities from GeoEye-1.
Anything else would be gravy, but I want to make sure that we are close to getting this bird delivering imagery to GeoEye’s customers ASAP.
What We Need To See
Continued Execution, Calm Words
No surprises.
Just status quo in terms of GeoEye-1 status, meaning everything looks good and is on track, and continued execution of their business model via new deals with vendors, resellers, and other governments around the world for the imagery that GeoEye will be delivering very shortly.
What We’ll Probably See
All’s Well
We’ll probably hear just that.
Some new deals, poor quarterly earnings as a result of the above-mentioned satellite revenue and order shortfall, and then a reaffirmation that GeoEye-1 is looking good and perhaps even a status update on the exact dates that imagery will start to be delivered and when we can expect measurable revenue from GeoEye-1 in this quarter.
Bottom Line
If you haven’t already, get in
It does not really matter what GeoEye’s earnings look like this quarter, and what happened in the past three months in terms of revenue generation, and profits.
That’s not why we are here.
We are invested in GeoEye for the future, and that future is actually the present.
GeoEye-1 is the most advanced commercial imagery satellite in operation today. When GeoEye begins delivering the certified imagery to their customers, GeoEye’s revenues and profits will soar, and year over year comparisons will look juicy indeed.
The time to play that is now, not later.
Wall Street will be listening in on the call, and also watching intently as this thesis plays out over the course of the next several months to a year.
Regardless of the gyrations in the market, I fully advocate you buy shares of GeoEye at any time the stock shows weakness as a result of outside factors.
As of right now, there has been no change in the investment thesis, and in fact that investment thesis has continued to favor us in a risk/reward scenario in that one of the largest hurdles, that of a successful launch and check-out of GeoEye-1, is now almost complete.
The fear and panic should be mostly removed from this stock, and now we can just settle in, and enjoy the fruits of my diligence and research as it plays out beautifully in the form of a much higher stock price over the course of the next 6-12 months.
GeoEye remains my #1 pick.
New to the GeoEye story?
- Read my initial buy recommendation here.
- or listen to my EXCLUSIVE interview with GeoEye’s management team here.
|
*Variables You Should Know About GeoEye, Inc. (NASDAQ: GEOY) |
|
|---|---|
| Current Recommendation: |
STRONG 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: |
$384.26 |
| Revenue (TTM): |
$167.34 |
| Cash/Debt: |
$221/ $247 |
| Current Price: | $22.00 |
| Risk Rating (?): | 8 (High) |
| Position Size (?): | 1/2 (5-5-08), 1/4 (6-12-08) |
| Buy Around Price (?): | $22.00 (5-5-08), $16.50 (6-12-08) |
*As of 11-7-08. Except share price, all values in millions.
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(2) comments to “GeoEye Q3/2008 Earnings Preview: Good News on the Horizon?”
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November 9th, 2008 at 9:47 pm
Hi Chris,
I see that GeoEye still has a risk rating of 8 on your books. Why is that? If GeoEye-1 starts providing a good stream of business, then shouldn’t the risk be slightly lower?
After all, risk is a measure of losing money.
Unless you are saying that GeoEye has a high risk of losing money.
November 9th, 2008 at 11:41 pm
Hey Jae,
I have listed all the reasons for why I felt like GeoEye had a risk rating of 8, but here are just a few of them:
- The inherent nature of satellites, they can stop working at any time, or lose their effectiveness, imagery quality, lose their orbit, etc.
If that happened, GeoEye is done, regardless of how well GeoEye-1 is streaming imagery.
- GeoEye relies on one customer, the NGA for about 55% of their revenue. This will most likely stay the same or increase.
Although the BASIC program was canceled which will help GeoEye, there is no telling what will happen when the new administration gets into office, or if budget cuts might eat into this order fill.
- GeoEye-1 has yet to check-out fully
- Financing needed to build new satellites. GeoEye has already started construction and purchase of items for GeoEye-2…they are now low on cash, and will either have to finance debt, sell shares, or get some other type of financing that very likely will be dilutive to shareholders.
- GeoEye isn’t a 10 risk because of a proven and tenured management team that has thus far run the business with aplomb.
Chris