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Morgan Stanley Highlights 'New Negative Details' On Future Of DigitalGlobe's EnhancedView

Morgan Stanley Highlights 'New Negative Details' On Future Of DigitalGlobe's EnhancedView

Morgan Stanley said, "New negative details on the future of EnhancedView could offset upside from new wins" for DigitalGlobe Inc (NYSE: DGI).

Westminster, Colorado-based DigitalGlobe provides earth-imagery products and services. Under the EnhancedView program, the National Geospatial-Intelligence Agency (NGA) acquires imagery and imagery-derived products on behalf of its clients within the U.S. government. This program provides authorized U.S. government personnel access to unclassified high-resolution satellite imagery.

Analyst Denny Galindo noted there is a lot of uncertainty in the business model and cash flows after the EnhancedView contract is replaced in 2020.

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The analyst sees more upside elsewhere, despite expecting 2016 EBITDA near the high end of guidance and more announcements of incremental 2017 sales.

As a result, Galindo downgraded the stock to Equal-Weight from Overweight on "uncertainty on key inputs like EnhancedView replacement contract size in '20, capital intensity, and margins can lead to wide range of value."

"Our $23 price target implies ~8 percent upside to our target price but offers a less attractive risk reward than other names in our coverage," Galindo wrote in a note.

Shares of DigitalGlobe closed Tuesday's regular trading session at $21.12 The stock has gained 35 percent this year and outperformed benchmark index S&P 500 (0.16 percent ytd).

Latest Ratings for DGI

Jul 2017PiperJaffrayDowngradesOverweightNeutral
Feb 2017DoughertyDowngradesBuyNeutral
Jul 2016JP MorganMaintainsNeutral

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