US: When the top executives of a young, fast-growing company announce plans to resign and shortly thereafter, a key shareholder unloads about half its position, one would expect its stock to crash. But for DigitalGlobe; that amounted to little more than a cloud briefly passing by its lens, observes a report, published in The Wall Street Journal.
According to the report, the company has been picking up government and business contracts at a rapid clip over the past few years as they use its high-resolution pictures for mapping, monitoring and managing their operations. The images have been used for everything from surveying and mapping damage from recent earthquakes in central China to tracking down Greek tax cheats by zooming in on their unreported swimming pools. As Jeff Rath, an analyst at Cannacord Genuity, puts it, DigitalGlobe is “essentially positioning itself as a monopoly” for these increasingly sophisticated systems that were most recently on display distinguishing oil from water in aerial views of the Gulf oil disaster.
Moreover, the report gives credit for all the success to Jill Smith, the chairman and CEO, who has run the company for the past five years and guided it through a successful IPO in 2009. She has recently announced her retirement. During her tenure, DigitalGlobe’s revenue has grown at a compound annual rate of 44 per cent, rising from USD 65.4 million in 2005 to more than USD 281.9 million in 2009. Since DigitalGlobe’s IPO in May last year, the stock has risen from 21 to 31, a 44 per cent gain.
Smith’s announced departure preceded another potential negative that bullish investors have taken in stride. DGI’s largest shareholder, the private-equity arm of Morgan Stanley, sold six million shares on September 14, 2010 in a secondary offering, roughly halving its stake, to 16 -18 per cent, of total outstanding shares (7.5 million).
“Investors aren’t worried about these developments,” said Matt Berler, an equity portfolio manager with San Francisco-based Osterweis Capital. “Smith has accomplished a tremendous amount during her tenure and should feel good about leaving. There’s still a lot of confidence among investors about the company’s business model and outlook.”
As a result, stockholders and analysts contend DigitalGlobe shares are still in ascent. Based on the company’s expected ability to roughly double in size over the next few years, Jeff Evanson with Dougherty & Co. in Minneapolis, and Paul Coster with JPMorgan, both have buy or overweight recommendations on the stock with 12-month price targets of USD 40. Coster noted that DigitalGlobe will raise its capacity by 60 per cent by 2015, aided by the launch of another satellite in 2014.
Lukoil, Russia’s largest energy producer, used DigitalGlobe’s satellite services to satisfy Moscow’s demand for updated maps of exploration and production facilities. The US outfit mapped more than 8,000 square kilometres in Russia’s central Perm region, which may hold one-third of the world’s oil reserves. Lukoil needed easy-to-use, updated maps to track land holdings, select properties to buy, and identify new and existing facilities, including holding tanks and pipelines.