Virgin Galactic is a space tourism company founded by British billionaire Richard Branson in 2004 aimed at providing customers with the opportunity to travel on commercial flights to space.
The company went public in late 2019 through a merger/ SPAC deal with Chamath Palihapitiya’s Social Capital, and since then it has conducted several successful test flights, including one on which Branson himself travelled in July this year.
While the company has substantial backing and some big names behind it, it’s competing in an increasingly crowded space tourism sector as other intrepid ventures such as Jeff Bezo’s Blue Origin and Elon Musk’s SpaceX seek a piece of the increasingly viable commercial space travel pie.
In recent months Virgin Galactic shares have suffered some hefty drops amid delays to commercial flights and other investor concerns. But what is the Virgin Galactic stock price prediction from analysts, and can the company bounce back?
SPCE stock analysis amid the wild ride
Virgin Galactic stock has had a wild ride since it became the first space tourism company to offer shares to the public back in 2019, and while it is up 81% since that date, the stock has suffered significant volatility over the course of the Covid-19 pandemic and the second half of 2021.
In October, Virgin Galactic announced that it would have to push the beginning of commercial flights towards the end of 2022 after an expected start date of early next year following the discovery of an issue with materials used on the crafts.
The revelation wiped over 16% off the company’s share price in one trading session, meaning that the price had lost over 60% since closing at a 2021 high of above $55 on June 25.
"Virgin Galactic has been performing routine tests and analyses to update its material properties database," the company stated in a news release.
"One of these recent laboratory-based tests flagged a possible reduction in the strength margins of certain materials used to modify specific joints, and this requires further physical inspection."
The shares are currently trading at around $18.30, representing a year-to-date decrease of 21.07%, after a wider than expected loss in third quarter results released on 9 November pushed down the price even further.
That was despite the company announcing that it had sold over 100 seats on future flights, taking the total to 700 of a targeted 1,000 by launch, at the higher price of $450,000 a ticket announced in August, up from an initial price of $250,000.
On November 16, Branson sold a further 15.6m shares, representing around 6% of the company, to raise cash to fund other parts of the Virgin empire which were severely impacted by the pandemic. In early trading the following day the stock had dropped almost 4% to $18.32 a share.
Latest earnings reveal losses
Virgin Galactic posted a wider-than-anticipated quarterly loss of $48m in Q3 2021, with revenue of $2.6m.
The loss was an improvement on the result from the prior year period, which was negative $92m on a net basis.
However, the company retains a cash balance of $1bn, comprising cash and cash equivalents of $721m and marketable securities of $286m, as of 30 September.
Virgin Galactic CEO Michael Colglazier said that the company was entering a period of investment in its fleet, and that demand for the product remained strong as they moved to commercialise the service by next year.
In July this year the company completed an at-the-market share offering to sell 13.7m shares of common stock for $500m, which will be used for general corporate purposes and primarily to expand the spaceship fleet.
Austin Moeller, Canaccord Genuity VP, senior aerospace and defense analyst said in an interview with Yahoo Finance that ultimately the company was yet to enter the revenue-generating stage of its growth, and that investors were unlikely to see higher revenues until the end of next year given the delays to the customer flights.
Analysts undecided on the SPCE stock forecast
Analysts are split over the Virgin Galactic share price forecast, with the stock given a consensus ‘hold’ rating by 15 analysts, according to MarketBeat, with five recommending it as a ‘buy’, seven as a ‘hold’ and three a ‘sell’.
The SPCE price target consensus currently stands at $32.57, representing a potential upside of around 78% on current market value, but a decrease from the $38.69 target set three months ago. The price targets vary among analysts from the low of $13 to the high of $50.
Among analysts there’s significant disagreement on the Virgin Galactic stock predictions, with Morgan Stanley’s Kristine Liwag lowering the target price from $25 to $17 on October 19 after the announcement of the flight delays. A day earlier UBS Group’s Myles Watson also lowered the price target from $26 to $15, downgrading the stock from ‘neutral’ to ‘sell’.
Conversely, Jefferies FInancial Group initiated coverage on the company at the end of August this year with a ‘buy’ rating and a price target of $33.
Note that analyst predictions can be wrong. Forecasts should not be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.
Could commercial space flight become a reality?
The question of is Virgin Galactic a good long term investment has to acknowledge the fundamentally speculative nature of the business, and the numerous uncertainties and competitive challenges which face the company in the years ahead.
While early signs of demand for tickets for space tourism over the next decade remain strong, the industry faces a host of challenges in becoming commercially viable and sustainable. There are significant risks as investors look to 2025, 2030 and beyond.
The stock has proved intermittently popular with investors who dare to dream along with Branson and others that commercial space flight will become a viable reality in the coming years, but capital expenditure and time taken to get there has hurt the stock.
Missed deadlines and delayed launch dates mean that the shares may carry a considerable risk.
Virgin Galactic has to navigate an array of challenges, not least competition from the likes of SpaceX and Blue Origin.
Virgin Galactic shares may carry significant risk to investors given the speculative nature of the space tourism industry, but could produce returns in the coming years if the company is able to meet its targets.
The SPCE price target consensus currently stands at $32.57, based on 15 analysts’ views aggregated by MarketBeat. The price targets vary among analysts from the low of $13 to the high of $50.
Note that analyst predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.
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