Virgin Galactic falls back to Earth, risks remain

Virgin Galactic Holdings (SPCE) the action exploded in the stratosphere, then plunged back to Earth twice, punishing the euphoric investors who chose to drive it out. Now down more than 75% from its peak of around $ 60 a share, Sir Richard Branson’s visionary spaceflight company may finally be worth a speculative bet for optimistic nonconformists in the niche space tourism market.

There is no doubt that the suborbital space tourism market is in its infancy. Rough estimates put the market worth just under $ 400 million in 2031. It’s really hard to assess how much the market could be worth in 10 years, but it’s clear that it will likely be out of reach for everyone. except for the richest. people excited to get a glimpse of sub-orbital space.

Continued innovations from Virgin Galactic could drive ticket prices down. Yet growing competitive threats and overspending, without a plan to move towards profitability, are not the keys to outperforming in the type of market environment we find ourselves in today. As such, I am currently neutral on the SPCE share.

Interest rates are expected to rise, with three rate hikes that could be considered for 2022. While it is more difficult to predict where rates will be in 5 to 10 years, the potential impact of much higher rates could potentially result. hyper speculation. -growth actions like Virgin Galactic for an extended duration.

Even though the stock of SPCE has lost more than 75% of its peak-to-trough value, it is almost impossible to tell when the stock will bottom out, given the lack of clarity regarding the underlying economy of the space tourism industry in the broad sense in the medium term.

Virgin Galactic and Space Tourism: Top betting trend or ephemeral fashion?

Will low orbit space tourism only be a short-lived fad for a specific group of wealthy people? Or will it become more accessible to the average consumer like the Airlines companies decades ago?

It’s hard to say. Regardless, the competitive spirit to visit the Next Frontier still seems pretty fierce, with billionaire Jeff Bezos also joining in the action with his company Blue Origin.

Indeed, Virgin Galactic and Blue Origin are two very different space companies with different means of reaching space. Blue Origin’s spaceflight experience could very well be more intriguing for those who can afford it, given that it uses a rocket that goes higher than Virgin’s spaceship, which takes off from the back of another plane in mid-flight.

For now, carrying payloads into space can help raise funds to invest in initiatives to make consumer space travel more affordable and more exciting. In any case, Elon Musk’s recent comments on SpaceX’s super-heavy Starship engine, expressing that it creates the “risk of bankruptcy”, are not at all encouraging for the prospects for the space industry.

The Taking of Wall Street

For Wall Street, Virgin Galactic has a Hold consensus rating, based on five Buy, two Hold, and three Sells awarded in the past three months. Virgin Galactic’s average price target of $ 29.20 implies upside potential of 104.6%.

Analysts’ price targets range from a low of $ 15.00 per share to a high of $ 50.00 per share.

The result on SPCE actions

While analysts’ price targets are astronomically high, Virgin Galactic stock is only suitable for the more adventurous investors who understand the stakes. As brilliant as Richard Branson is, many other geniuses set their sights on the stars.

For this reason, I take a raincheck on the stock of SPCE. Plus, there is just too much uncertainty about future cash flow, with too much capital spending for my liking.

Disclosure: Joey Frenette does not own any shares of the companies mentioned at the time of publication.

Disclaimer: The information in this article represents the views and opinions of the author only, and not the views or opinions of TipRanks or its affiliates. Read the full disclaimer>

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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