Virgin Galactic (NYSE:SPCE) has been on fire as a number of catalysts have come to life. This has created liftoff in the share price, with SPCE stock surging more than 60% over a span of just a few weeks.
It’s got investors wondering whether this name can continue its ascent or if the rocket boosters are coming back to earth.
Fundamentally and technically, various catalysts are lining up for Virgin Galactic. When these observations begin to overlap, it’s what gives stocks that explosive potential to really take off. With a big short interest in the stock, any sizable rally has the potential to ignite a big short squeeze. When that happens, it only adds fuel to the fire.
So what are some of these recent catalysts?
A Bevy of Positives
On June 22, it looked like SPCE stock was set to break out and run higher. That was as shares were up 18% in pre-market trading on reports that it had inked a deal with NASA. The two agreed to “encourage commercial participation in orbital human spaceflight to the International Space Station while enabling the development of a robust economy in Low Earth Orbit.”
It was one more step toward commercial space flight opportunity and investors saw its agreement with NASA as another step in the right direction. It helped that a few days later, reports surfaced that Virgin Galactic should secure its FAA license within the next one to two spaceflights.
That news came on June 30. By then, the stock had already come back down to earth. However, that news helped set the tone as shares began to bubble higher, like a volcano, just waiting to erupt. On July 15, the company announced its longtime CEO George Whitesides would transition to Chief Space Officer.
Replacing him as CEO is Michael Colglazier, who joins “following a long career at Disney, bringing over three decades of experience in developing and growing consumer-oriented multi-billion dollar businesses strategically, commercially, and operationally.”
In the last month Virgin Galactic has a partnership with NASA to encourage space tourism, reports of likely FAA clearance in the near future, and a new CEO to lead the company. Last but not least, there’s some positive talk about valuation.
SPCE Stock Undervalued?
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Tesla’s (NASDAQ:TSLA) Elon Musk has another company called SpaceX. It’s a private entity that works with NASA and has plans to launch a satellite-based internet service called Starlink. The business models are different, but SpaceX is looking to raise capital at a $44 billion valuation.
For those keeping track at home, that’s over eight times the market cap of SPCE stock. Further, Morgan Stanley recently made a longer-term bull case for a $175 billion market cap for SpaceX.
Again, these are different businesses, but even a valuation that is half the size of what SpaceX is looking for now could mean a huge share price appreciation for SPCE stock. With so few space-related stocks, a big raise from SpaceX should be a positive for Virgin Galactic too.
I’m an optimist, but not blind to reality. From the start of the month to this week’s high, shares of SPCE stock have risen 68%. In the short-term, it may need to unwind a bit. Virgin Galactic has three price targets on it currently, at $23, $24 and $29. Perhaps it can get to the latter, but it’s already seen a big move in the short term.
I am most optimistic about its long-term potential. Space tourism sounds great and if Virgin gets it down, then it could lead a whole new industry. However, it also has a deal with NASA to “facilitate the development of high speed technologies.” Now that has some real commercial application potential right there.
While all of this potential hinges on a longer-term story, SPCE stock has some solid momentum with its current catalysts. Look to buy the dips along the way.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities.
