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America’s Widening Wealth Gap Will Boost Virgin Galactic Stock

Virgin Galactic is for the ultra-rich, and that's why the company will be successful

Virgin Galactic (NYSE:SPCE) is easily one of the most exciting companies I’ve ever discussed. It encompasses the core reasons why I’m focused on the upcoming technological revolution, which I term the Roaring 2020s. Essentially, Virgin Galactic has taken the travel industry concept and has applied it to an entirely new paradigm. The implications are profound and long-lasting; thus, you should strongly consider incorporating SPCE stock into your portfolio.

Virgin Galactic (SPCE) billboard on the New York Stock Exchange, across from the Fearless Girl statue.
Source: Tun Pichitanon / Shutterstock.com

As I mentioned in my Nov. 1 podcast, Virgin Galactic is presently the only publicly traded pure play in the coming space tourism market. With the company and the industry actively fleshing out their business models, we should see a return of robust enthusiasm for SPCE stock.

Of course, you must walk first before you run. Here, Virgin has been making substantial headway. A few weeks ago, the company completed a second glide flight test in New Mexico. This sets the stage for space flights, giving the organization a rocket booster in terms of technical credibility.

Further, at the end of last month, management announced that they expect to clear the last remaining hurdles of the Federal Aviation Administration after one or two more test flights. As a result, SPCE stock enjoyed a sizable lift on the news. Better yet, shares have been ticking higher as Virgin Galactic knocks off one milestone after another.

According to Vertical Research Partners analyst Darryl Genovesi, Virgin’s next major step is to reveal the spacecraft’s cabin. Through this action, management would further cement the viability of its transformative business. It’s one thing to launch spacecrafts; it’s quite another to showcase how the technology applies to the consumer.

But will this be enough to maintain momentum for SPCE?

Changing Wealth Landscape Bolsters SPCE Stock

I think most people will agree that the concept of space travel is an alluring one. However, where bullish analysts lose some prospective investors is the price of entry. At $250,000 per ticket, launching toward the edge of space — and for a short moment — is neither practical nor accessible.

After all, with $250,000, you can buy yourself a decent starter home in many parts of the country. Given this dissociation between the reality for the uber-rich that can afford such joyrides and everyone else, SPCE stock seems very speculative. However, it’s this very dynamic that makes Virgin Galactic’s business so compelling. Let me explain.

Obviously, with such an exclusive industry, you naturally enjoy a high barrier to entry. Unlike the “green” retail market where suddenly everyone was a botanist, only an elite few can compete in space flight and tourism. Thus, Virgin can invest in its research and development without worrying too much about a low-cost disruptor.

But more importantly, the consumer market for SPCE stock is much more favorable today than it was decades ago. That might seem strange given the present pandemic. However, I’ll do you one better — once this crisis fades away, SPCE will enjoy an even greater upside pathway.

It all comes down to America’s wealth gap.

Back in 1989, the top tenth wealth percentile in the U.S. owned nearly 61% share of total net worth. On the other hand, everyone else owned 39%. Last year, the split became 70%/30% in favor of the ultra-elite.

Share of total net wealth by wealth percentile
Click to Enlarge
Source: Matt McCall Research Team

Intriguingly, recessions or crises saw the allocation increasingly benefit the wealthy. Following the 2000 tech bubble and just before the Great Recession, the split was 67%/33%. Aside from a brief respite in 2018, the wealth gap has been worsening for the middle class.

Conceivably, we could enter a fractured consumer market where those who have, have more. Likewise, those who have less will see their share of wealth decline. Though cynical, this dynamic only increases the viability of an investment like SPCE stock.

Multiple Premium Revenue Opportunities

If you’re thinking that Virgin Galactic is a snobby, aristocratic organization, you’re probably not off the mark. It caters to the affluent along with high-level government organizations.

For example, management is beaming about Virgin’s potential synergies with NASA. Once operations are fully up and running, the company could take astronauts and researchers on suborbital missions. Relative to orbital flights, Virgin Galactic represents serious cost savings.

And in many ways, Virgin’s business model is forward thinking. Like it or not, the consumer base of the middle class is steadily shrinking. As recent history demonstrates, calamities and economic downturns exacerbate this trend.

On the flip side, the ultra-wealthy’s base is increasing. I doubt this is a trend that will reverse, especially amid the present troubles. Therefore, don’t fight the tape and instead buy SPCE stock.

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.  


Article printed from InvestorPlace Media, https://investorplace.com/2020/07/wealth-gap-boost-virgin-galactic-spce-stock-ultra-rich/.

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