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Virgin Galactic’s Training Component Adds One More Piece in the Puzzle

SPCE stock got a credibility lift thanks to the recent NASA deal

Virgin Galactic (NYSE:SPCE) announced June 22 that it had signed an agreement with NASA’s Johnson Space Center to create a private orbital astronaut readiness program for those interested in purchasing private astronaut missions to the International Space Station (ISS). SPCE stock gained 15% on the news.

With All Its Technology, SPCE Stock Isn't Just a Space Play
Source: Christopher Penler / Shutterstock.com

While there’s a long way to go before Virgin Galactic is running routine flights into space, it’s clear the company is building the infrastructure necessary to be a big part of the commercial space industry. Sure, Jeff Bezos and Blue Origin will also be a big part of this industry, as will Elon Musk and SpaceX. Still, I don’t think there’s any question Virgin Galactic has caught the interest of both retail and institutional investors.

Now it’s just a matter of what happens next.

Virgin Galactic Is Writing the Playbook

For those wealthy people who’ve reserved space on a future flight, which will cost $250,000, they are likely to be encouraged by NASA’s endorsement of its astronaut training programs already in place.

“Virgin Galactic has already developed a customized Future Astronaut Readiness program for its customers flying out of Spaceport America in New Mexico. Virgin Galactic’s existing space experiences could play an important role in the training for orbital travel, allowing passengers to become familiar with the environment in space, such as G-forces and zero-G,” stated the company’s June 22 press release.

“Spaceport America, Virgin Galactic’s home base, will be utilized for some elements of the training program, using the facilities designed for private astronaut training.”

Having the first-mover advantage in this type of industry is tremendously important.

First, it’s not a cheap business. This isn’t something you can bootstrap very quickly. It takes a serious financial commitment along with significant brainpower. It reminds me a lot of the early days of train travel in this country when railroads such as the New York Central Railroad were merged to form Conrail, a government-funded private company whose sole purpose was to revive rail travel in the Northeast.

Ultimately, Conrail was purchased by Norfolk Southern (NYSE:NSC) and CSX (NASDAQ:CSX) in 1997, with the two companies taking different parts of the Conrail system.

Is that what’s in store for the space industry? It’s too early to tell, but I wouldn’t be surprised if Virgin Galactic were one of the major players in any future consolidation efforts.

As I stated in March and again in June, SPCE stock is a speculative buy. Just as Tesla (NASDAQ:TSLA) must have been exciting to own a decade ago around the time it went public in 2010 — TSLA is up 3,000% since its initial public offering — I think the same thing is true about Virgin Galactic today.

It worked out well for Elon Musk. Will the same be true for Richard Branson?

It Depends on SPCE Stock

On June 25, Virgin Galactic reported that it completed a second test flight of VSS Unity over Spaceport America in New Mexico. The test flight is another step in the company’s pathway to commercial space flight.

“This glide flight, flown at higher speeds, allowed the team to continue to evaluate systems and vehicle performance in advance of future rocket-powered space flights from the company’s new operating base in New Mexico,” Virgin Galactic said in a statement.

Flying VSS Unity in glide configuration at higher speeds enables certain vehicle systems to operate close to the environment seen during phases of rocket boost on a spaceflight.”

In my last article about Virgin Galactic in early June, I was quite confident that the company was building several different revenue streams, including commercial flights into space as well as hypersonic point-to-point flights here on earth. Now, with the agreement with NASA, it’s added third-party training to its business model.

Frankly, I could see Virgin Galactic adding additional revenue streams such as Virgin Space Hotels many years down the road. And while it would be nice to have Richard Branson and his family along for the ride, Virgin Galactic can be successful without the visionary owning a piece of the company.

That said, I do believe Branson will sort out his other businesses so that the billionaire can remain an integral part of the company’s space plans.

“I believe Richard Branson will figure out how to rescue the rest of his empire without giving up his entire investment in Virgin Galactic. If he doesn’t, someone else will likely step into the breach to carry the company over the finish line and into space,” I wrote on June 9.

I continue to think the future will be kind to Richard Branson’s vision for space travel. If that’s true, you can be sure loyal shareholders will be amply rewarded.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2020/07/spce-stock-virgin-galactic-new-revenue-stream/.

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