It’s time to put some more capital to work today.

I am initiating a second (2) BUY recommendation of GeoEye, Inc. (Nasdaq: GEOY), a provider of space-based and aerial imagery and geospatial information.

I’m pounding the table hard for this one, and I could easily see GeoEye’s shares doubling in value from this point forward in 6-8 months!

I’m not even kidding at all.

Here’s why.

New to the GeoEye story?

Start: with my initial buy recommendation and company overview here, OR: read my latest update on the company here, OR: read my take on the company’s latest management conference call and earnings release here.

Why I Am Adding to My Position

Bargain basement stock price, wonderful opportunity

It all started with GeoEye’s last earnings release and analyst conference call.

Investors were already skittish as a result of GeoEye’s delayed launch (through no fault of their own) of their latest satellite, GeoEye-1, and when earnings appeared to come in light, that sent the stock tumbling to new yearly lows.

I won’t go into detail as to exactly what the apparent problems and misunderstandings were, but suffice it to say, Wall Street has this one dead wrong.

Here’s a brief rundown of why I am adding to my GeoEye position today:

• GeoEye is trading below a market cap of $300 million:

Let me put this in perspective for you.

In order to build and launch GeoEye’s next generation satellite, GeoEye-1, GeoEye spent about $250 million and was reimbursed for another $250 million from the National Geospatial-Intelligence Agency’s (NGA) NextView program.

All told, it took about 4 years to build and design the satellite, with an expected launch date of August 22nd, 2008.

When you include the costs to build the satellite, test it, launch it and get insurance on it, the total runs at around $500 million.

At today’s market cap, GeoEye is trading for LESS than the actual value of this satellite alone!

Even if someone came today, and decided to buy out GeoEye and offer them $500 million (a premium of about 66% at today’s closing price), they would essentially be getting the rest of GeoEye’s assets for FREE!

That includes: Their offices and employees, ground stations, current contracts and backlog totaling over $250 million, 2 operating satellites (OrbView-2 and IKONOS), and all other current assets such as their MJ Harden acquisition, joint ventures, etc.

Oh, and that doesn’t include the revenue that GeoEye is currently generating, and the fact that they are cash flow positive!

• GeoEye-1 Launch:

It has been confirmed that GeoEye-1 will be launching August 22nd, 2008.

The stock has tumbled from a high of about $35 per share to it’s current levels mainly because of the delay in launching this satellite, through no fault of GeoEye.

You see, when the government needs to launch higher priority satellites, it typically bumps whoever was next in line for its own needs.

It’s an unfortunate element of dealing with the few launch service providers that are reliable and in operation.

As a result of multiple delays in launching GeoEye-1 (it was originally expected to launch in March of 2008), GeoEye’s revenues have come in a little bit light, and their profitability has also suffered, and in turn the market has beaten the stock up.

This is short sighted thinking, and presents another opportunity for longer term investors like us, to get in at a bargain basement price.

GeoEye-1 WILL launch.

Of course there is risk with the launch not going properly, or the satellite not responding or working properly once it is in orbit, but that is a risk now that overwhelmingly favors us.

Once GeoEye-1 launches, GeoEye’s backlog will begin to be filled, they will sign more contracts, and more than that, the market will breath a sigh of relief, and the stock will begin to climb.

As it stands, GeoEye is already seeing orders from online portals like Google (Nasdaq: GOOG) for their imagery, even BEFORE GeoEye-1 launches.

Don’t forget that once GeoEye-1 launches it will be the highest resolution satellite in operation today.

• Other Valuation Metrics Are Dirt Cheap:

I won’t go into laborious detail about this.

If you want you can read my initial buy recommendation (when GeoEye was at $22 per share), and then apply those valuation metrics to the lower price today.

If you compare GeoEye’s valuation to any competitor in its sector using any reasonable valuation metric, including discounted cash flow (DCF), you will see that the shares are really trading on the cheap.

Because GeoEye’s closest competitor, DigitalGlobe, has not yet begun trading on the open market, an apples to apples comparison cannot yet be made, but from the analysis and research that I have done thus far, GeoEye is the superior company with the more promising growth prospects and capital structure.

• Veteran, Experienced Management Team:

I can’t even begin to stress this enough.

The team at the helm of GeoEye is experienced and have carefully expanded GeoEye’s business via intelligent acquisitions to diversify their revenue stream, as well as guiding GeoEye through the current turbulence regarding the delay in launching their satellite.

Listen to their latest conference call, and you will see a tenured and experienced management team that I feel extremely confident in.

• DigitalGlobe IPO:

Much has been made about the potential IPO of GeoEye’s ONLY U.S. competitor, DigitalGlobe (NYSE: DGI).

Rest assured that there is no way that DigitalGlobe will be coming public any time soon with current market conditions the way they are and the current valuation with which GeoEye is trading.

However, once DigitalGlobe does come public, it will allow analysts and Wall Street to peer deeper inside the geospatial and aerial imagery market, and determine, as I have already, that the best public company on the market in this space has been and continues to be, GeoEye.

This catalyst will further draw attention to the space, and enhance GeoEye’s cache with investors.

Bottom Line

It’s time for a sound risk/reward proposition

I won’t discount that there are significant risks to investing in GeoEye right now.

Chief among those is the failure or delay of, the launch of GeoEye-1.

If something goes wrong, and GeoEye loses this satellite, the stock will tank, and you should be prepared to lose up to 50% of your investment.

However, that being said, the track record of these types of launches with this particular rocket, and launch service company, is near flawless.

While there can be no guarantee of a safe and successful launch, the current risk/reward scenario sits right where I like it.

If GeoEye-1 successfully launches, GeoEye’s stock will at least double in value in short order, while if it does not, the stock could decline by 50%.

That’s a winning strategy long term any day of the week.

Give me this type of risk/reward scenario 10 times, and I’ll show you a hugely profitable scoreboard.

Needless to say, GeoEye absolutely qualifies for my Double Thesis.

We have a relatively low risk, high reward company with intact fundamentals, a proven management team and track record, and upcoming catalysts to propel it into the stratosphere…pun intended.

Lock in some shares today, look to buy on any more dips (hint: there won’t be many more!), and let’s all have a launch party on August 22nd to share in the joy of the gains to come from GeoEye’s continued execution.

New to the GeoEye story?

Start: with my initial buy recommendation and company overview here, OR: read my latest update on the company here, OR: read my take on the company’s latest management conference call and earnings release here.

*Variables You Should Know About GeoEye, Inc. (Nasdaq: GEOY)
Current Recommendation:	STRONG BUY
The Company:	GeoEye is a leading provider of global space-based and aerial imagery and geospatial information. GeoEye’s imagery is used in a broad array of applications that include: government monitoring and surveillance, intelligence gathering, construction planning, scientific research such as environmental monitoring, and the online mapping industry via Google and other partners.
Why Buy Now:	Established Large Player/Customer Base Consistent Revenue Streams High Margin Business Fantastic Growth Potential in an Expanding and Rapidly Developing Market Downside Protection In Recessionary Climate Several Upcoming Positive Catalysts Should Bring Attention to the Sector and Company Fantastic Stock Price Valuation/Entry Point Largely Underfollowed Stock (Only 1 Analyst) Well Capitalized for the Next 12 Months or More
Market Cap:	$294.2
Revenue (2007):	$183.76
Cash/Debt:	$212/ $247
Current Price:	$17.00
Risk Rating (?):	8 (High)
Position Size (?):	1/2 (5-5-08), 1/4 (6-12-08)
Buy Around Price (?):	$22.00 (5-5-08), $16.50 (6-12-08)

*As of 6-11-08. Except share price, all values in millions.