DigitalGlobe Still Trying To Find The Right Model

It's been a while since I've written about DigitalGlobe (NYSE:DGI), but in the meantime, a lot of the concerns I had about this satellite imagery and analytics company back in early 2015 have proven to be valid. Namely, DigitalGlobe was too aggressive in stoking expectations for a significant ramp in commercial revenue and arguably a little too cavalier in talking down the threat posed by small-sat competitors.

As old optimism and expectations were washed out, DGI shares slid almost non-stop from the time of my last article to a low early this year of under $12 (a roughly two-thirds fall). Since that time, though, management has gotten a lot better about shifting toward an "under-promise/over-deliver" model with the Street, commercial revenue has improved, and the company has had some notable success expanding its business with friendly foreign governments.

There are still numerous relevant operating threats for DigitalGlobe, and the true ultimate size of the commercial opportunity is a key unknown. That said, management has done a good job of improving margins despite a lower revenue trajectory and mid single-digit FCF growth from 2015 onward can support a fair value close to $30.

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DigitalGlobe Still Trying To Find The Right Model