Quite often, we invest in ideas that improve upon some minor aspects of our lives. They can address needs we didn’t know we had, replace old needs and ideas, and impart rewards. But on some occasions, capitalists get to do so much more. Every so often capitalists find themselves on the edge of a new frontier, at the vanguard of a transformational moment in our evolution. Virgin Galactic (NYSE:SPCE) stock is that opportunity.
With the IPO this past fall, Virgin Galactic became the first, and only, public company focused on commercial human spaceflight. This is not a pie in the sky opportunity (pun intended). In the most recent earnings report, the company announced some serious achievements.
“The path to final approval is a Verification and Validation (V&V) program that contains 29 elements,” according to the release. “… [we] have now cleared 24 of 29 V&V provisos.” They are approved to take manned flights currently, and are closing in on getting an important Federal Aviation Administration license.
Astronauts Sign Up Here
Over 400 deposit payments have been made, which represents $100 million of potential deposits. As of the end of April, there were about, 9,160 total prospects in various stages of their pipeline (600 of which have made $80 million in deposits).
Now they just need to make it to next year, when they can start receiving meaningful revenue. They had a strong cash position of $419 million as of the end of the quarter.
Through the Covid-19 crisis, they reduced and suspended onsite facilities in March. Two-thirds of the work was able to be completed from home. Unfortunately, hat left a third of the work that was unable to be done from home. In April some operations were resumed, under a modified process for safety. About 90% of employees are back working on site.
In the earnings call, CEO George T. Whiteside stated that Covid-19 has forced them to address their protocol, but he feels they have been able to keep their timeline on track for passenger flights in 2021.
During that time, CFO Jon Campagna expected cash burn to be the same but won’t give specifics. There was also a reduction of director pay and Hiring freezes.
Side Mission Unlocked for SPCE stock
Virgin Galactic is also partnering with Nasa to create “only designing, building, and flying a crude vehicle over Mach 3 at the edge of hypersonic flight.” This has many commercial applications.
By law, that the private-public partnership contracts which are procured during formal bidding processes will lean towards those with a track record of successes.
The Federal Acquisitions Institute states that ” Information regarding a contractor’s actions under previous contracts and orders, also known as past performance, is an indicator of future performance and is one of the most relevant factors that a selection official should consider in awarding a contract.”
For Virgin Galactic and space fellows like Blue Origin and SpaceX, finding a balance between aspirational and financial goals can be a challenge. Companies will live and die by their ability to give investors a reason why their goals can be met in their lifetimes, but also pay attention to the big pot of money in Space Force and NASA contracts.
Virgin Galactic is striking that right balance.
Keeping Focused on Opportunities
Many people think SPCE stock’s most immediate commercial opportunity would be near-supersonic flights. I disagree, although it puts much need points on the board. In the past, attempts to commercialize fast traveled, like the Concorde, have worked for a while, but eventually lost their novelty.
In 2003, right before Concorde stopped flights partly because of the plane crash in France, it also was experiencing sluggish demand. It was also $10k round trip, and that was with oil 20% lower and no global pandemic.
The other exciting opportunities for the industry, and Virgin Galactic, are satellite transportation and the scientific advances made as a byproduct of the research.
Where No Man Has Gone Before
With the funds received, they will work to create point-to-point travel along with a satellite launch service. This will be the long-term key to their profitability.
Placing a price tag on the future of this company would be like placing a price a company that will do what the B&O Railroad did for intercontinental travel.
Unlike other stocks, it is hard to render a bean-counter’s method of prognosticating the future of Virgin Galactic. There is a long ramp to profitability, and it won’t be a straight line. Virgin has many index providers who own the stock, and by virtue, the stock has moved with the broad market. However, it is starting to operate as a secular growth story. I think SPCE stock offers a good opportunity for those willing to wait and be patient. And maybe you will make history along the way.
As of the writing to this article, Emmanuel Henson does not own shares in Virgin Galactic.
