By Guest Columnist Chris Fernandez of PeakStocks.com

In a positive step towards the full commissioning and checkout of its latest satellite, GeoEye-1, GeoEye (GEOY) announced that GeoEye-1 has taken its first images from space and is one step closer to providing useful imagery to its customers.

While this doesn’t give us as investors the 100% green light, it is one more necessary and important step in ensuring that GeoEye-1 is fully operational and able to fulfill the promise of the four years it took to develop, build and launch the satellite.

So with the apparent checkout inevitable, is now a good time to pick up shares of space-based and aerial imagery provider GeoEye?

There’s been a lot written about GeoEye-1’s “first image” ever taken, but we need to realize that this is just one more step in a lengthy process that can take anywhere from 30 to 45 days to test all the functionality and systems of GeoEye-1 and ensure that it is working properly.

More important for our investment thesis is that GeoEye's largest customer, the National Geospatial-Intelligence Agency, which accounts for more than 50% of revenue, approve of the imagery. Without the NGA’s approval that the imagery meets its strict criteria for imagery standards, nothing else really matters.

GeoEye-1 launched successfully on Sept. 6 from Vandenberg Air Force Base in California. Since that time, the satellite has been undergoing calibration and checkout in order to fine-tune the imagery that it is collecting, as well as thoroughly test and make sure that all the internal and external systems are functioning properly.


GeoEye-1 simultaneously collects 0.41-meter ground resolution black-and-white imagery in the panchromatic mode and 1.65-meter color (multispectral). However, due to U.S. licensing restrictions, commercial customers such as Google (GOOG) will only get access to imagery that has been processed to half-meter ground resolution.

It looks like the really tricky stuff is nearing a conclusion and that all GeoEye needs to do now is continue to refine its image quality to ensure its approval by the NGA. Management is confident that this will transpire and that GeoEye will begin selling usable imagery to its customers by the end of October or early November at the latest.

So why don’t I recommend a purchase of GeoEye’s stock now, especially with the stock getting hammered along with the rest of the market over the last week?

Good question.

When I look over my positions in GeoEye, I see that I already own three quarters of a full position, and my average purchase price is about $19.79, or right around where GeoEye sat as of the market’s close on Friday, Oct. 9. It closed on Monday up a few dollars to $22.38.

When GeoEye crossed the $17 threshold, I was tempted to buy more shares and make my position a full one, but there is a chance that GeoEye-1 might not check out or might fail in some other meaningful way before all is said and done, and with a three quarters of a position stake already in the company, I wanted to wait until we hear the “all clear” that GeoEye-1 is actually delivering usable imagery to the NGA and other customers.

Now, with all that being said, GeoEye is still my No. 1 pick for new money right now. It’s just that my money had already been committed to GeoEye, and there was no compelling reason to further push my way into the stock.

If, however, GeoEye’s stock slides further, I will not hesitate to further cost average in, especially if GeoEye-1 proves to be fully functional and starts delivering imagery to its costumers.

Bottom Line: If you don’t already own shares in GeoEye, now’s the time to get in, at least half of a position or more. If you do own shares but aren’t fully invested, look to scale in some more on any additional weakness.
By Guest Columnist Chris Fernandez of PeakStocks.com

If you are fully invested as I am, hold on and look to add to your position on any definitive rationale to back you up, such as an extremely depressed stock price or final verification from GeoEye that GeoEye-1 is working and fully functional and is delivering usable imagery.

Chris Fernandez is the founder and CEO of PeakStocks.com, a Web site dedicated to the micro-cap and small-cap stock universe. A version of this article was originally published here.

Posted on Oct. 13, 2008