Virgin Galactic: Making All the Right Moves

Stock Market

Compared to last year’s revenue-free Q2, Virgin Galactic (SPCE) generated sales of $0.57 million in 2Q20, primarily a reward for carrying NASA experiment payloads on the VSS Unity’s 21st flight to the edge of space. That said, the company reported a wider loss than expected.

To be fair, both the top-and bottom-line results are of little interest to investors right now, considering the company is still in pre-sales mode.

Of more interest are the opportunities in store for the space tourism business and here there were several eye-catching announcements.

For one, the company reopened ticket sales for flights into space, at a new and higher price point of $450,000 per seat, while also offering premium packages for groups or even the ability to charter an entire spaceship.

“We view the announcement as a significant positive milestone for the company, which had previously been expected to resume sales immediately following the Unity 22 flight of Sir Richard Branson,” said Canaccord Genuity’s Austin Moeller.

Additionally, Virgin Galactic announced transition to the new Delta-class spaceplane would happen sooner than previously expected. While not much is yet known about the Delta-class program, management said it expects the vehicle’s launch-rate to be one per week.

“This represents a dramatic improvement over VSS Unity (the SpaceShipTwo-class), which is averaging a turnaround time between flights of ~7-8 weeks at best,” Moeller noted. There will likely be a reveal for the new spaceplane sometime later in 2021.

That said, the September 2021 Italian Air Force flight will be the last mission to space for a while, as the pivot towards Delta has also resulted in an extended maintenance period for the VSS Unity and VMS Eve. The maintenance and upgrade phase, which had been planned to carry on until the end of the year, will now last until the end of 1H22.

Overall, however, as 2022 was likely to feature “only a token number of customer spaceflights anyway,” Moeller believes the company is making all the right decisions.

“While the push to the right of additional customer spaceflights is somewhat disappointing, we view the company’s new focus on improving the efficiency of the existing spaceships and scaling up the Delta-class fleet as a prudent strategic decision,” the analyst opined. “With a higher launch rate for Unity and Imagine and a new fleet of vastly more capable spaceships and motherships, Virgin Galactic will be much better positioned to ramp up EBITDA and free cash flow generation over the course of the decade.”

As such, Moeller reiterated his Buy rating and $48 price target, suggesting upside of 44% from current levels.

Virgin Galactic elicits the full spectrum of analyst opinions on Wall Street; based on 4 Buys, 6 Holds and 1 Sell, the stock has a Moderate Buy consensus rating. The bulls are edging ahead, as the $37.11 average price target suggests shares have 38% of upside in the coming year. (See SPCE stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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