The owners of Virgin Galactic (NYSE:SPCE) stock  are struggling to assess the company’s potential and its financial results.

As with any growth stock like Virgin Galactic, there are many pieces of information to digest before making a move. Investors are all over the spectrum; some believe it’s a must-buy speculative stock, while others think it’s an absolute no-go.

Value investors can’t really evaluate it because it isn’t yet mature.  And Virgin Galactic simply hasn’t proven much to the markets yet. Some growth investors, on the other hand, believe that recent developments indicate that the company has a bright future.

But the evidence I’ve seen has not made me believe that SPCE stock is worth buying.

Virgin Galactic’s NASA Deal Is Significant

Virgin Galactic’s recent deal with NASA does make Virgin more interesting and could provide it with revenue which the company seriously needs. The agreement is certain to attract investors to SPCE stock in the short-term. 

The focus of the partnership will be on high-speed civilian air flights. For obvious reasons, such flights are seen as having a great deal of potential. Virgin will make a lot of money if it can figure out how to cut flight times significantly.

The company has indicated that it, in partnership with other firms, is looking to develop vehicles that can travel as much as four times faster than planes. But that won’t happen overnight. I’d imagine that Virgin and its partners won’t unveil a high-speed air vehicle for at least five years.

So the project won’t boost Virgin Galactic stock. Until its efforts produce verifiable revenues, the NASA deal is somewhat similar to what space travel was for the company five years ago. Specifically, it’s a potentially revolutionary project with a great deal of potential to make investors a large amount of money. But both projects remain unproven.

Future Revenue and Virgin Galactic’s Stock

A few years ago,  the owners of SPCE stock would have said that Virgin Galactic would generate revenue through space flights.

The firm’s plan was to provide commercial space flights for individuals who were willing to shell out huge amounts of money to travel to space. That’s an exciting business, and it’s still central to the operations of the company. However, with the NASA deal, Virgin has now moved forward on civilian commercial air flights, too. That is, it’s looking to enable consumers to travel more quickly between cities on Earth.  

Ultimately, that is good news for Virgin Galactic. The deal has broadened its operations while potentially enabling it to generate massive revenue down the road. But the expected return on its investments in that project are still several years away in the best-case scenario.

So the company needs to make money in the near-term. And some recent news does make me more upbeat on that front.

Regarding space flight, the company recently announced that it has received 400 refundable deposits as part of its ‘One Small Step’ initiative.

Assuming that all the people who made these deposits ultimately buy tickets, the company will earn over $100 million of revenue from them.  

Virgin has also received over 1,200 registrations of interest. If all of those registrations are converted to reservations, it will  receive another $300 million of revenue. 

The company reported a net loss of $60 million in the first quarter of 2020, so those revenues will be vital for it. And Virgin Galactic only recorded $238,000 of revenue in Q1. Essentially, it isn’t making money yet, but it’s spending a lot. 

When Will Virgin Benefit From Its Space Program?

Despite Virgin’s partnership with NASA, it’s probably not moving away from its focus on space.

For the foreseeable future, Virgin Galactic’s stock will rise and fall based on the progress of its commercial space flight business.  High-speed, point-to-point air flight won’t materialize for Virgin Galactic for several years, if it ever does. If, however,  Virgin becomes a first-mover in that area, SPCE stock will make its owners a lot of money.

The Bottom Line on SPCE Stock

Virgin Galactic is a really interesting company. Who wouldn’t want to fly to the edge of space? I know I would. But I don’t think I’d want to be on one of Virgin’s maiden voyages because of the uncertainty of being a pioneer.

And there’s also too much uncertainty facing SPCE stock. Once the company’s revenue outlook is clearer and its business is better defined, I’ll look at it again.

At that point, the shares will still be able to rise a great deal, since the firm will  be able to grow tremendously. And the NASA deal only increases the stock’s potential gains.

There are certainly reasons to be bullish on the shares now, but I won’t recommend the stock until the company shows me that it can safely and profitably bring people to the edge of space. 

As of this writing, Alex Sirois does not hold a position in any of the aforementioned stocks.