Is Virgin Galactic Stock A Buy?

Virgin Galactic Holdings Inc (NYSE:SPCE) is Virgin Group founder and British billionaire Richard Branson’s space exploration company. Like SpaceX and Tesla Inc (NASDAQ:TSLA), it has a close working relationship with Virgin Group, and the stock skyrocketed after being included in Cathie Wood’s ARK Space Exploration ETF.

It was downgraded soon after as a major investor left, begging the question – is Virgin Galactic stock a Buy?

SpaceX beat it to the launchpad for the world’s first commercial space flight in May 2020. This is despite the company’s relation to Virgin Atlantic. One would think an airline would be an easier leap to spacecraft than an electric vehicle. But it wasn’t meant to be for Branson and his team.

Sister company Virgin Orbit (which spun off from Virgin Galactic in 2017) did manage to successfully launch a satellite into orbit in 2021 though. And Virgin Orbit created its own subsidiary called VOX Space to work with the U.S. national security market on satellite launches.

It’s a lot to keep track of, so let’s check the charts on Virgin Galactic to determine if it’s a zodiac match for investors or if it’s incompatible with a growing portfolio.

Celebrities Are Queuing Up To Board Virgin Galactic 

Virgin Galactic Holdings is a Las Cruces, New Mexico-based spaceflight company working on commercial spacecraft and tourism. It collaborated with numerous organizations, including NASA, OneWeb, Boom Technology, and Under Armour.

The company is based in New Mexico to be close to Spaceport America, where it will train passengers and launch. It also has operations in the Mojave, California Space Port.

It counts celebrities like Justin Bieber and Leonardo DiCaprio among its prepaid customers. And Branson promises he’ll be the first person to take a test flight before they’re available to the public. Although it’s not certain when that will be.

The company went through several test flights through the late 2000s and 2010s, although most were disastrous. The most recent test flight for its VSS Unity spaceplane in December 2020 failed to reach space when the ignition sequence glitched and an onboard rocket failed to fire.

It pressed on and spun off its payload launch division into Virgin Orbit, which has had successful flights, but it still doesn’t have approval from the Federal Aviation Administration (FAA) for passenger flights.

Meanwhile, both Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin may have taken the lead in the commercial space race.

This caused the company to lose some of the luster it gained from inclusion in the ARK Space Exploration ETF and has some investors wondering if it’s a good stock buy.

Is Virgin Galactic Stock A Buy?

Virgin Galactic Holdings had a market capitalization over $7 billion at the turn of the year. Shareholders have been on a roller coaster ride that could gain or lose 20 percent on a single day.

It goes without saying that SPCE share price is not for the feint of heart, it can skyrocket or explode from one day to the next.

Much of the price volatility is more due to its competition and sister company than Virgin Galactic itself. Good news for Virgin Orbit, SpaceX, and ARK all contributed to the perception for all space stocks.

All of this is without turning a profit. The company’s EBITDA for the first half of 2020 was a loss $107 million. This compares to $360 million cash and cash equivalents the company had on hand entering the back half of the year.

The company named Michael Colglazier as CEO in 2020 and has over 700 deposit payments for pre-paid commercial spaceflights. However, the COVID-19 pandemic further delayed its inaugural launch, and that highlights the risks of investing in Virgin Galactic.

Virgin Galactic Faces Enormous Risks

Several major investor firms downgraded Virgin Galactic in January 2021, including Susquehanna Financial analyst Charles Minervino. In addition, Abu Dhabi’s sovereign-wealth fund Mubadala Investment – the company’s third-largest shareholder – cut its stake from 14.9 million (7.08 percent) to 11.8 million shares (5.04 percent).

It also faces a lot of physical risk – in 2007, three Scaled Composite employees died while testing rocket motor components for Virgin’s SpaceShipTwo. Scaled Composite is the Northrop Grumman-owned space company partnered with Virgin.

In 2014, the test flight of the VSS Enterprise blew up, killing one pilot and seriously injuring the other. This shows the potential risks of spaceflight.

And while its insurance company can handle the risk to employees, bringing customers in (especially affluent ones) could spell disaster if anything goes wrong.

On top of all this, the December 2020 launch of VSS Unity failed to leave Earth’s atmosphere and reach space. A communication error caused it to default and not fire the necessary launch rocket, showcasing just how many moving parts are involved and what can go wrong.

And then there’s Bezos and Musk to contend with.

Can Virgin Galactic Competitors Win?

Virgin Galactic isn’t alone in the space race. Both Musk’s SpaceX and Bezos’ Blue Origin have their sights set on the stars too.

Blue Origin hopes to start carrying passengers as early as April 2021 as its New Shepard rocket booster and capsule successfully completed 14 tests and is on its way to a second stable configuration test flight.

And SpaceX generated media buzz in May 2020 when it carried two NASA astronauts in its Falcon 9 rocket launch. This is the first commercial launch in the U.S. since NASA stopped in 2011.

It followed up with another mission in November, showing a clear leg up on Virgin Galactic.

Is Virgin Galactic Stock A Buy? The Bottom Line

Virgin Galactic is a space exploration company that spun off from Virgin Atlantic airlines. It uses much of the same flight technology, although even this is licensed from another Virgin subsidiary called Virgin Orbit.

This mitigates risk, but it also steals some of its thunder. Most successful flights in 2020 were either from competitors SpaceX and Blue Origin or its Virgin-owned sister companies.

However, Virgin Galactic’s inclusion in the ARK Space Exploration Fund could keep its stock price buoyed despite the downgrades from analysts. If the company succeeds in its mission, it could be part of a $30 billion industry by the end of the decade.

Of course, it’s not a straight path to success, and the company is competing with pet projects from the two wealthiest men in the world.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.