What’s Happening With Virgin Galactic Stock?

Virgin Galactic (NYSE: SPCE), an aerospace company focused on suborbital spaceflight for private individuals and researchers, has seen its stock rally by around 130% year-to-date, currently trading at about $54 per share. There are a couple of factors driving the surge. Earlier this month, the company announced that it will carry out a test flight of its SpaceShipTwo suborbital spaceplane in mid-February after a technical problem forced it to abort a launch attempt in December. Based on Virgin
SPCE
Galactic’s previous comments, it will likely have two more spaceflight tests before it commences commercial flights. Investors are likely buying into the stock in anticipation of the outcome of these tests.

The stock has also garnered attention due to the GameStop-Reddit short-squeeze saga. Virgin Galactic stock has a relatively high short interest of over 25%, and this is probably attracting some retail investors who see the prospect of a short squeeze. Thirdly, investment firm ARK Invest, which saw stellar returns on some of its exchange-traded funds through 2020, plans to launch a Space ETF soon. Although the fund’s exact holdings are not known yet, investors are likely buying into high profile space names in anticipation of the ETF’s launch, and this could also be helping Virgin Galactic stock.

Overall, we think Virgin Galactic’s stock looks highly speculative at current levels. The stock trades at over 400x consensus 2021 Revenues, despite the fact that its commercial flying timeline has been delayed multiple times. You can arrive at your own valuation for Virgin stock using our interactive analysis Virgin Galactic Valuation: Expensive Or Cheap? We value the stock at about $20 per share.

[8/11/2020] Virgin Galactic Q2 Earnings & Other Updates

Virgin Galactic, an aerospace company focused on suborbital spaceflight for space tourists, published Q2 earnings last week. While the company’s financials are not very relevant yet, given that it has yet to begin commercial operations, there have been a couple of noteworthy developments in recent weeks.

Space Tourism Updates

The company indicated that it could begin commercial service of its spaceflight by early 2021, flying its founder Richard Branson. While this is behind the company’s previous 2020 timeline, the delay was largely expected due to the Covid-19 related disruption. The company continues to test its space flights and noted that it had now cleared 27 out of 29 Federal Aviation Administration milestones. The FAA clearance is key to receiving final approval to begin flights with commercial customers.

New Projects

The company also provided updates on some new projects. The company is working with Rolls-Royce to develop a supersonic aircraft that would be able to carry between 9 to 19 passengers, capable of traveling at about 3x the speed of sound. Separately, the company is also looking to expand its services to start flying customers to orbital destinations such as the International Space Station. The orbital flight is typically much more expensive and currently costs about roughly $50 million today (versus suborbital flights that are priced at $250k per ticket) ^[1]

Recent Fundraising

On Monday, the company raised about $460 million by selling 23.6 million equity shares in a secondary offering priced at $19.50 per share. The should considerably boost Virgin’s cash balance, which stood at about $360 million at the end of Q2 2020.

Interested in investing in Space-related stocks? Check out our theme The Final Frontier: Space Stocks To Watch, which includes publicly listed space companies such as Lockheed Martin (NYSE: LMT), Aerojet Rocketdyne (NYSE: AJRD), and Iridium (NASDAQ: IRDM)

[7/16/2020] Valuing Virgin Galactic Stock

Virgin Galactic is an aerospace company focused on suborbital spaceflight for private individuals and researchers. The company hasn’t been able to generate much buzz, unlike the Elon Musk-backed SpaceX, considering that it is still in the test phases and doesn’t generate meaningful revenues as of yet. That said, things are likely to change in the next few quarters, as it likely begins commercial space flights carrying paying space tourists from 2021, charging each passenger about $250,000. The stock currently trades at about $19 per share, translating into a market cap of under $4 billion. So what exactly are the factors driving Virgin Galactic’s Revenues And Valuation?

How Does Virgin Galactic Make Money?

• Virgin will primarily make money by carrying tourists on its space planes. Customers will be able to experience a few minutes of weightlessness and also see the curvature of the Earth’s surface.
• The company has signed up about 600 future passengers, taking deposits of about $80 million. It has indicated that roughly 9,000 more prospective customers had expressed interest as of April 2020.
• Virgin’s Spaceship Two space plane can carry 6 passengers and 2 pilots. While the company currently has one vehicle, that can be re-used, the second and third vehicles are expected by the end of 2020 and 2021. ^[2]
• If we assume 50 flights over 2021 at full occupancy, this would translate into 300 passengers carried for the full year.
• As the company charges customers about $250k per ticket currently, total passenger revenues would stand at about $75 million in 2021.
• Besides this, the company has also been generating some revenue by carrying payloads into space and if we assume that this will remain flat at about $4 million, total revenues would stand at $79 million for 2021.
• Our interactive analysis What’s Driving Virgin Galactic’s Revenue & Valuation? allows you to modify key drivers to arrive at your own estimates for the company’s revenue and stock price.

Virgin Galactic’s Outlook And Valuation

• Virgin Galactic is currently valued at a market cap of about $4 billion, or about $19 per share. This translates into a P/S multiple of about 50x based on our projected 2021 revenues.
• While this does make the company a risky bet, given that it has yet to generate meaningful revenue, the upside could also be significant.
• Demand for space tourism is likely to grow among high-net-worth individuals, as the technology matures and commercial flights commence. For perspective, UBS estimates that space tourism will be a $3 billion market by 2030. ^[3]
• There are larger markets that Virgin could eventually target using its space ships, including high-speed point-to-point international travel via outer space. This could pit the company against traditional long-distance airline flights. UBS estimates that this market will stand at about $20 billion by 2030.
• There could be a scarcity premium at play as well. While the broader space exploration sector has seen a lot of interest in recent months after privately-held SpaceX launched its first manned mission in late May, Virgin is the only publicly listed commercial human spaceflight company.
• For perspective, SpaceX was valued at about $36 billion as of its February funding round. (related: What Is Driving SpaceX’s Revenues & Valuation?)

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