A lightning rod among the investing community, Virgin Galactic (NYSE:SPCE) stock has received plenty of positive and negative attention because of its jaw-dropping price action. Detractors consider it the poster boy for market hype, while defenders deem the share price fully justified.
I’m in the latter camp, as I see the company as visionary. The share price, which has retraced from its peak, is reasonable for long-term investors.
It won’t happen overnight, but I expect the naysayers to come around as Virgin Galactic proves itself as a first mover in the exciting space tourism niche.
One Small Step …
If a casual observer only looks at the stock chart and neglects to investigate the company itself, I can understand why he or she might mistake Virgin Galactic stock for a flash in the pan. The shares went nowhere fast in 2019, only to take off like a rocket in January and most of February of this year.
The price retracement is giving you a second chance to get in and potentially ride Virgin Galactic shares back to $40 and beyond. Billing itself as the “First and Only Public Company Focused on Commercial Human Spaceflight,” Virgin Galactic is preparing to fulfill the vision of private space flight that was nothing more than a fantasy for so many generations.
You can call it one small step for humankind, but I appreciate the company’s vision and expect private space flight to become a normal part of the culture at some point, much like electric vehicles. Unfortunately, it’s not for everyone since the price tag of a space trip is estimated to be around $250,000 per person.
Even at that lofty fare price, there’s no shortage of demand as Virgin Galactic has reported a backlog of 600 “astronauts” and an additional 3,000 inbound inquires as of Dec. 31, 2019. A more recent news release puts the number of inquiries at nearly 8,000. I expect that number to skyrocket as the first launch approaches.
… One Giant Leap
Virgin Galactic’s launch won’t commence until at least later this year, but early buy-and-hold investors won’t mind waiting because you’re taking a stake in an innovator. As CEO George Whitesides explained, last year’s progress paved the way for a monumental event in the history of space flight, whenever that might happen to take place:
Throughout 2019, we continued to achieve key milestones in our mission to open access to space in a safe, innovative and affordable way… We are continuing to build on our strong momentum as we enter the most exciting chapter of our story to date and prepare for commercial launch.
2019 actually ended quite well for the company, as Virgin Galactic had $480 million in cash and cash equivalents in the fourth quarter, along with only $6 million in capital expenditures. Besides, October of 2019 marked a signal event for the company when Boeing (NYSE:BA) embarked upon a strategic partnership with Virgin Galactic, pledging to invest $20 million into the nascent space flight start-up.
The company has already completed its test-flight program and is preparing its vehicles for long-term service, so I wouldn’t be surprised if the initial commercial space flight happens sooner than the critics expect it to. By then the share price could be much higher than it is now.
The Final Word on SPCE Stock
I’m assigning an “A” rating to this controversial stock because I’m bullish on the space tourism market and because it’s better to get in early than to watch it take off, wishing you were aboard the ship.
Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.