It’s time to start a large position in GeoEye Inc. (NASDAQ: GEOY), or add to your position if it is less than 3/4 immediately.

The provider of space based and aerial imagery is trading at a huge discount right now to its true value, and it won’t be long before the market realizes this (as has already started happening once GeoEye bounced off of its lows last week).

In addition, with upcoming catalysts, and insider buying, now is not the time to delay.

I would even advocate buying long term call options for those that are familiar with that strategy as within 3-6 months, GeoEye’s shares will be much higher than they are now.

In this post I’ll detail the reasons why.

This is a must read as we enter 2009 for those looking for somewhere risky, yet calculated, to put their money.

New to the GeoEye story?

GeoEye provides space-based, and aerial imagery and geospatial information through high-resolution and low-resolution imagery, imagery-derived products, and image processing services to customers worldwide.

This capability benefits a broad array of industries including national defense and intelligence, online mapping, state and local governments, environmental monitoring and land use management, oil and gas, utilities, disaster management, insurance and others.

Want more?

• Read my initial buy recommendation here.
• OR: listen to my EXCLUSIVE interview with GeoEye’s management team here.
• OR: Read my latest update on the company’s Q3/2008 earnings release and conference call here.

Let’s Start With the Catalysts

• GeoEye already successfully launched their latest satellite, GeoEye-1, a few months back.

All that awaits us now is the final approval by the National Geospatial-Intelligence Agency (NGA), which WILL be forthcoming any day now.

How can I be so bold and predict that the NGA will approve GeoEye-1’s imagery any day now?

Simple, and I’ll go into it in more detail below, but the recent insider buying, by not only the CEO but board members, leads me to believe things are going well in this department and it’s only a matter of time before GeoEye-1’s imagery is fully approved for sale to the NGA.

Let me put this another way: Would you buy $100k in stock of your own company (no matter how “cheap” it got) if your only source of future revenue and growth was destined to fail and not get the approval that you needed to produce revenue from it?

Nope, I don’t think so either.

I sincerely believe, and am keeping my money fully invested in GeoEye, because I now feel almost 100% certain that we are almost there.

Any day now we’ll get a press release telling us that GeoEye-1 is free to fly.

• GeoEye’s new Service Level Agreement (SLA) with the NGA and other customers means higher, more steady revenue.

I recently wrote about the good news that was recently announced whereby GeoEye would be getting a constant stream of revenue from the NGA for the next year to the tune of $150 million, matching 2008’s total expected revenue.

This contract does not even include GeoEye’s additional contracts with foreign vendors and governments, orders from the NGA above and beyond this SLA, and other commercial and business agreements to sell their imagery that GeoEye already has in place and will be instituting come 2009.

Analysts predict GeoEye’s full year 2009 revenue at about $277 million vs. $140 this year.

This means that GeoEye will just about double their revenue in 2009, and with it will come huge gobs of profit and cash flow because of GeoEye’s fixed cost, high-margin structure.

This also doesn’t include GeoEye’s newly announced deal with Telespazio whereby the European based satellite image provider has agreed to be GeoEye’s official reseller of satellite imagery in Europe and North Africa.

This and other similar deals like it that GeoEye has recently negotiated, will provide them with higher margin revenue and steadier profits due to their more linear fashion and as a result of agreements which allow GeoEye to sell any imagery they take from their satellite fleet as many times as they want without any compensation going to the regional or other affiliates as was done in the past (don’t ask me why!).

Looking at past EPS/Revenue/Margin figures is fruitless.

We are paying up for the future, not the past.

The SLA as well as other recently announced and renegotiated deals with GeoEye’s affiliates across the globe is just one more step towards smoothing out the revenue and profits that GeoEye can expect starting in a couple of weeks.

• Recent insider buying has picked up significantly.

It’s true that GeoEye’s stock has taken a dip here in the last few weeks for unknown reasons, but at the same time, insiders have rushed to purchase shares at rock bottom prices ranging from $15-16.00 per share.

This includes:

- CEO Matthew O’ Connell purchasing 6,250 shares at $15.93 ($99,562.00 total) on 12-19-08

- Board member Lawrence A Hough purchasing 5,000 shares at prices ranging from $14.87 – $15.40 ($75,500 total) on 12-19 and 12-22-08,

- and finally, board member Michael Horn who purchased 3,000 shares at $15.85 ($47,500 total) on 12-22-08.

The CEO also picked up 2,000 shares at $18.84 back in May for about $37,600 worth.

As I stated above, you don’t plunk down money in a company that is going nowhere, at least not close to $100,000.

If GeoEye-1 were having serious issues that management foresaw as being irreparable, then they surely wouldn’t be putting more money into a company that would be headed for bankruptcy.

Now let’s take a look at GeoEye’s valuation and future outlook…

View original at: PeakStocks.com

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