Virgin Galactic Plunged 24%, Why is the Investment Behavior Still Optimistic

After Virgin’s founder Branson completed the first commercial space flight of humans, the company immediately announced a plan to issue additional stocks. The stock price plummeted by 17%, but Wall Street analysts believed that the flight was still a successful marketing campaign.

The 71-year-old British billionaire Virgin Galactic  founder Richard Branson became the first aerospace company owner to start space travel , On the same day, the Virgin Galactic “Unity” spacecraft successfully flew the spacecraft, and ran away from Bezos’s blue origin. Branson became the first person to enter the edge of space in private spaceflight.

On July 12, Virgin Galactic announced its application for additional issuance of US$500 million in common stock. The company’s share price was hit. At the close of trading on Monday, Virgin Galactic plummeted by more than 17%. On July 13, Virgin Galactic plunged again by 7.2%. , Fell more than 24% in two days. However, this may not matter to founder Richard Branson.

During the flight, Unity’s top speed exceeded Mach 3 and reached an apogee of 86 kilometers, which is higher than the edge of space defined by NASA and the US Space Force as an altitude of 80 kilometers.

Although Ken Herbert of Canaccord thinks someone will question this. The five-star analyst said: “Although Blue Origin may provoke in the next few days that the highest point of Branson’s flight (above the US-defined space boundary) is below the internationally recognized Carmen Line (100 kilometers), But we believe that Branson’s achievement is a large-scale marketing coup by Virgin Galactic, which the public cannot ignore.”

After landing, the CEO of Virgin Galactic set the company’s goal of bringing tourists to the edge of space at least once a day. However, Michael Kerglaser, who heads Virgin Galactic, did not clearly state the timetable for the company to expand its business operations. He admitted that the company faces major obstacles to expansion in the short term.

Nonetheless, Herbert believes that Branson’s “earth space line” has several upcoming catalysts. These include:

The upcoming Italian Air Force flight;

Completed the maintenance of the Unity and VMS Eve in the 4th quarter of 21 years;

An announcement that Virgin Galactic fares will be higher than the previous US$250,000 level.

Herbert believes that in addition to the existing 600 customers who have already purchased tickets, whether Virgin Galactic can increase sales is an important indicator for commercial space flight.

The analyst believes: “If the fare is substantially increased to US$500,000 and the demand can still be maintained at a high level, this will be a very positive indicator of Virgin’s business model.”

Branson once again demonstrated his superb marketing and acting skills, but Herbert said that the challenge for Virgin Galactic now is to “maintain momentum and develop a flight plan in 2022 to demonstrate a repeatable and ever-increasing pace of commercial launches.”

All in all, Herbert maintains a “Buy” rating on SPCE stock, even though his $35 target price is 17% downside from the current stock price. It will be interesting whether this analyst will lower his rating or raise his price target in the coming months.

Generally speaking, based on 4 buy, 6 hold and 1 sell ratings, Virgin Galactic’s consensus rating is “moderate buy”.