J.P. Morgan Reiterates Overweight on DigitalGlobe (DGI)

J.P. Morgan is out with a research report this morning, where it reiterates its Overweight rating on DigitalGlobe Inc. DGI; it has a $40.50 price target on the name. The JPM analysts cited the US National Geospatial Intelligence Agency’s (NGA) recent announcement that DGI has been awarded (along with GEOY) a contract under the long-anticipated EnhancedView program. DGI received a ten-year contract worth up to $3.5 billion; the awards are far bigger than we expected and JPM thinks the stocks should react positively. The JPM analysts added that they, “Assume the contract will straight-line after a 2-year ramp, resulting in ~$350mm in total NGA revenues annually. The US government accounted for 75% of FY09 sales, or ~$211mm. We assume the EnhancedView contract will replace all previous contracts with the US government, implying the EnhancedView contract will add an incremental ~$139mm to annual revenues. The analysts added, “Our updated DCF analysis indicates a share price of ~$46.50 for DGI, but we are sticking with an EV/EBITDA-based price target with a nearer term perspective.”