- Wells Fargo analyst Matthew Akers initiated coverage of Virgin Galactic Holdings Inc (NYSE:SPCE) with an Underweight rating and a price target of $4, implying a downside of 35%.
- SPCE has additional risk, according to the analyst, as he doubts it can create its new Delta spacecraft and continue to fund operations without another capital raise. Akers believes that retail investor interest in SPCE is driving its valuation, which could fall further if economic activity slows.
- Also Read: Wells Fargo Sees Notable Upside In Rocket Lab USA
- Akers notes that SPCE expects to develop and field its new Delta class spaceships by 2025, with customer flights in 2026, which is two years faster than prior aircraft development programs. He is skeptical that SPCE can source major components and complete integration and testing without raising additional capital.
- According to the analyst, ticket sales must increase by more than tenfold. SPCE's current valuation, 1,000 paying customers, will be flown per year by the end of the decade. SPCE was only able to sign up 70 passengers yearly for most of its history, but it gained 200 in the last year.
- Related: Here's Why Wells Fargo Sees 55% Upside In Maxar Technologies
- It is possible that ticket sales will increase once commercial flights commence, but the analyst believes that an increase in such magnitude is unlikely.
- Aker believes that an increased oversight by the FAA could significantly affect SPCE's costs.
- Price Action: SPCE shares are trading lower by 2.24% at $6.12 on the last check Tuesday.
