Virgin Galactic remains a ‘long-term story’ but stock rebounds 14% after earnings

Shares of Virgin Galactic Holdings Inc. rebounded more than 14% on Wednesday after the company reassured investors that it was on track to transport space tourists this year and to prepare its next generation of spacecraft spatial.

Virgin Galactic reported a narrower fourth-quarter loss and a handful of revenue on Tuesday evening, and more importantly, it confirmed its schedule to deliver its first space tourism flights later this year on its Unity spacecraft while on the right track with maintenance needs.

Demand for its “one-of-a-kind experience” remains strong, the company said.

The quarterly results “indicate capacity constraints (with) the first private astronaut spaceflight slated for late 2022 and a steep ramp based on the Delta-class spacecraft” expected in late 2025 or 2026, the company wrote. Jefferies analyst Greg Konrad in a note to clients Wednesday.

Demand is not an issue, as Virgin Galactic has an order book of 750 customers which should continue to grow, he said.

“While we recognize (in the short term) the lack of catalysts, the potential (in the long term) offers an attractive value proposition on scaling up supply to meet demand,” Konrad said.

Virgin’s balance sheet provides a cushion for this ramp, he said. The company has approximately $905 million in cash and marketable securities and an additional $425 million from a convertible debt offering.

“Virgin Galactic has the capital to continue to grow its fleet and manage the use of short-term cash to support investments,” he said.

Austin Moeller of Canaccord Genuity issued a similar plea for investors to be patient.

“It’s important for investors to understand that Virgin Galactic is a long-term investment story,” Moeller said in his note.

“While the first half of 2022 may be light on key milestones ahead, we believe the completion of the spacecraft/mothership upgrades in Q3 are the most significant near-term execution catalysts for the stock.”

Virgin told investors it was in the “final stages” of negotiations with suppliers to prepare for production of the second-generation motherships. Details and timelines for the new motherships are expected to arrive this year.

The company has also set a target date of 2025-2026 for the start of commercial service using its Delta spacecraft.

Moeller said he expects a batch of about four Delta suborbital spaceplanes carrying passengers by 2025, he said.

Virgin has set a goal of reaching 1,000 deposits for its space tourism flights before launching commercial service. Reservations for the $450,000 flight opened to the general public last week.

After that ride, the company told Wall Street it would create a priority list for overflow interest, asking for a $10,000 deposit so potential space travelers get first dibs on the next batch of tickets for sale.

Konrad and Moeller both retained a buy rating on the stock. The pair are among 12 analysts polled by FactSet and join two other Wall Street analysts in rating the stock as a buy. Five rate it as a hold and the other three rate it as a sale.

The stock’s average price target is $19.83, up almost 130% from Wednesday’s price.

The stock has lost more than 80% in the past 12 months, contrasting with gains of around 11% for the S&P 500 index. SPX,

Previous AAPL Dividend Announcement $0.1600/share 02/22/2022
Next Through his family business, this MBA helps empower refugee women