Should You Buy the Dip in Virgin Galactic Holdings?

: SPCE | Virgin Galactic Holdings Inc. News, Ratings, and Charts

SPCE – Virgin Galactic (SPCE) stock has grossly underperformed the broader markets in 2021 and is down 67% from record highs. This is a result of its weak financials and high research and development expenses, making it a high-risk bet despite the recent pullback.

In 2021, several growth stocks have lost significant momentum after stellar runs. As growth stocks generally trade at steep valuations compared to their revenue and earnings, it’s enticing when they are available at a lower multiple. 

One such stock is Virgin Galactic Holdings (SPCE), which more than doubled in 2020 and is now down 15% year-to-date.  In fact, Virgin Galactic stock is now down 67% from all-time highs. SPCE is an aerospace company that develops human spaceflight for individuals as well as researchers in the U.S. It also manufactures air and space vehicles.

Given the recent pullback in stock prices, let’s see if SPCE is a buy right now.

What impacted Virgin Galactic stock recently?

On September 10, Virgin Galactic announced its plans to delay the Unity 23 flight mission by a few days due to a conceivable manufacturing fault in a module related to flight control. The Unity 23 was a mission that would focus on microgravity research. Virgin Galactic confirmed the defect was not in-house but part of third-party equipment.

SPCE was also impacted after Blue Origin successfully launched its second space flight that had noted Star Trek actor William Shatner onboard. In addition to Shatner, the all-civilian flight also had paying customers making it the company’s first commercial launch. Further, last week Virgin Galactic confirmed its first commercial launch (the Unity 23 mission) will now begin in Q4 of 2022.

This longer-than-expected delay might raise a red flag for investors who think that Virgin Galactic is losing the space race to its peers.

The bull case for Virgin Galactic stock

Shortly after Richard Branson’s flight the company priced bookings for its commercial flights at $250,000 per ticket. Virgin Galactic has now confirmed the minimum price per ticket has increased to $450,000 which suggests there would be higher priced bookings as well.

In an investor presentation prior to Virgin Galactic’s SPAC (special purpose acquisition company) merger, the company forecast to fly 1,565 passengers to space annually. In case these estimates are met, it will generate over $700 million in sales. As per earlier estimates (on ticket prices of $250,000), Virgin Galactic had forecast sales of $590 million and EBITDA of $274 million.

But as the ticket prices have almost doubled, it might lead to a tepid demand environment. Alternatively, investors should be optimistic given the company has managed to develop a pricing strategy at an early stage.

The final verdict

Bank of America has forecast the space industry to touch $1.4 trillion in the next decade, more than tripling in this period.  And Wall Street analysts expect SPCE stock to increase by 50% in market value in the next 12-months. 

However, despite a rapidly expanding addressable market, Virgin Galactic is a stock I will avoid right now.  At best, Virgin Galactic will be on track to report sales of $700 million by 2024 (as the launch has been delayed by a year), valuing SPCE stock at a forward price to 2024 sales multiple of 7.4x.  At worst, the company that’s part of a highly disruptive industry, might continue to disappoint investors which can also lead to another catastrophic delay in the launch of its commercial flights.

There is a lot of uncertainty surrounding Virgin Galactic stock, which ended the June quarter with a cash balance of $551.6 million. In the last two years, it spent $281 million in research and development expenses while its operating loss since Q2 of 2020 stands at a hefty $306 million.

It suggests Virgin Galactic will have to raise additional capital in the form of debt or equity which will either pressurize the balance sheet of a loss-making company or result in shareholder dilution.


SPCE shares . Year-to-date, SPCE has declined -15.09%, versus a 22.19% rise in the benchmark S&P 500 index during the same period.


About the Author: Aditya Raghunath


Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
SPCEGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Christmas in July for Stock Investors!

Yes, the S&P 500 (SPY) made new highs again on Tuesday. But really it is the 6X gain for the Russell 2000 small cap index Tuesday...and 12% gain this past week that is grabbing everyone’s attention. Let’s discuss why this is happening...if it will continue...and my 12 favorite stocks to rally in the weeks ahead. Read on for more...

3 Promising Tech Stocks Under $40 for Long-Term Investment

The increasing demand for technology services worldwide fuels the tech industry. Amid this backdrop, it could be wise to buy under $40 tech stocks, such as HP Inc. (HPQ), Box, Inc. (BOX), and Teradata Corp (TDC), for long-term investment. Continue reading…

3 MedTech Stocks to Add to Your Portfolio in July

The MedTech sector’s promising future is driven by technological advances, unceasing demand for medical treatments due to an aging population, and increasing global incidence of diseases. To that end, strong MedTech stocks such as Tactile Systems Technology (TCMD), Electromed (ELMD), and Embecta (EMBC) could be wise portfolio additions in July. Read more...

3 Bank Stocks Benefiting From High Interest Rates

Amid global economic uncertainties, major U.S. banks like JPMorgan (JPM), Wells Fargo & Company (WFC), and PNC Financial Services (PNC) have defied expectations with strong revenue and earnings reports for the second quarter. Considering their robust performance, investing in these stocks could offer stable returns to your portfolio. Read more…

Investor Alert: Load Up on Small Cap Stocks!

Large caps time in the sun is now over and thus no shock that the S&P 500 (SPY) pulled back from recent highs. It is time for small caps to shine which was clear in their nearly 4% gain Thursday even as the Magnificent 7 was bathed in red. Why is this happening? What comes next? And what are the best stocks to own now? The answers to all that and more are shared in the commentary below...

Read More Stories

More Virgin Galactic Holdings Inc. (SPCE) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All SPCE News