Shares of Virgin Galactic (SPCE) have burnt massive wealth for shareholders. Valued at $391 million by market cap, Virgin Galactic is a space tourism company that went public as a SPAC (special purpose acquisition company) in late 2019, and surged over 400% during the meme stock mania in 2021.
Today, SPCE stock trades 98.4% below all-time highs. Let’s see if Virgin Galactic stock can recover from current levels.
Swiss National Bank Increases Exposure to SPCE
Virgin Galactic surged over 22% this Tuesday after it was revealed that Swiss National Bank raised its position in the beaten-down stock. Swiss National Bank, Switzerland’s central bank, increased its stake in SPCE by 23%, driving investor optimism higher. However, investors should note that SNB’s purchase this week totaled just $135,000, and does not justify a 20% hike in share prices.
Moreover, the space stock might soon move lower, given its close to 28% short-interest ratio. This means 28% of the company’s outstanding stock is held by short sellers who expect prices to move lower. A short interest ratio of over 10% is considered high, as it indicates a bearish sentiment.
A Milestone Mission Is in the Cards
Separately, Virgin Galactic is preparing for its final Unity spacecraft flight. The launch window for its Galactic 07 mission will open on June 8, which will also be the final flight on Unity aircraft, after which commercial operations will shift to the much-awaited Delta-class aircraft.
Unity has four passenger seats priced at $450,000 each and can make just one spaceflight each month. Comparatively, the Delta aircraft can occupy six passengers and is capable of completing eight flights each month. The Delta tickets will also be priced higher, at $650,000 per seat.
Is Virgin Galactic Stock a Good Buy?
In Q1 of 2024, Virgin Galactic reported revenue of $2 million, up from just $400,000 in the year-ago quarter. That suggests the company is regularly flying passengers into space, allowing it to increase sales by 400% year over year. However, it remains unprofitable, given its operating expenses totaled $164 million in Q1, up from $113 million in the year-ago period.
While Virgin Galactic has disclosed plans to build a second-generation spacecraft (Delta-class), the space jet won't be ready for another two years. So, Virgin Galactic needs to support its cash burn rates as it continues to invest in research and development to launch the spacecraft as soon as possible.
Virgin Galactic ended Q1 with $195 million in cash, down from $217 million at the end of 2023. Its short-term investments also totaled $570 million, down from $657 million in the year-ago period.
What is the Target Price for SPCE Stock?
Out of the nine analysts covering SPCE stock, two recommend “strong buy,” four recommend “hold,” one recommends “moderate sell,” and two recommend “strong sell.”
The mean target price for Virgin Galactic stock is $2.54, indicating an upside potential of over 150% from current prices.
Recently, investment bank TD Cowen lowered its price target on SPCE to $2 per share. In an analyst note, TD said that if Virgin Galactic can operate two new Delta-class spacecraft by 2026, it might report sales of $450 million annually at peak capacity, enabling the company to record a positive free cash flow.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
