Between Space X founder Elon Musk and Virgin Galactic (NYSE:SPCE) founder Richard Branson, you’ve got a couple of big personalities (and, perhaps, big egos as well). Prospective holders of SPCE stock might feel like they have to choose sides. If so, then why should they choose Virgin Galactic?
To be completely honest, it takes a certain type of faith and vision to invest in SPCE stock. Space tourism is an exciting and future-facing market. The bulk of the revenues won’t be generated this month or even this year.
Therefore, if you’re insisting that Virgin Galactic must meet certain traditional benchmarks, such as strong earnings data, you’ll probably be disappointed.
But sooner or later, a leader in luxury space tourism will emerge. Musk is a fierce competitor, but so is Branson. And with a recent dip in the SPCE share price, you might be able to own a stake in tomorrow’s leader at a reduced price today.
A Closer Look at SPCE Stock
Virgin Galactic made financial market history in October of last year with the debut of the first special purpose acquisition company within the space tourism niche. I suppose you could say it was a special SPCE stock space SPAC (sorry, I couldn’t resist that one).
Branson’s humble brag at the time was, “If the public want to dabble a little bit in a spaceship company, own a little bit of a spaceship company, they can now do so.”
And so, a true wild card of a stock with no dividend and no established price-to-earnings ratio was born. The trading community didn’t seem to mind, though, as they bid the SPCE stock price all the way up to a 52-week high of $42.49 in February of 2020.
Without a doubt, the onset of the novel coronavirus put a damper on people’s space-flight dreams for a while. As a result, the SPCE share price slid to the $10.50 area.
Some recovery has taken place in SPCE stock, but the bulls have a lot of catching up to do. Can Branson’s brainchild restore confidence among investors, or are the company and its stock lost in space?
No Revenues? No Problem
Folks who rely exclusively on standard fiscal metrics probably won’t cheer Virgin Galactic’s second-quarter financial data. Again, a certain measure of faith and open-mindedness is crucial here.
Unfortunately, Virgin Galactic reported zero revenues during the second quarter of 2020. Moreover, the company posted an earnings loss of 30 cents per share, thereby matching the earnings-per-share result from the first quarter.
But then, this company is all about the future, not the present. That’s why SPCE is fundamentally speculative in nature. Besides, the second-quarter data isn’t all bad.
Encouragingly, as part of its “One Small Step” initiative, Virgin Galactic increased its number of refundable deposit payments from future passengers from 400 in the first quarter to 700 in the second quarter.
If 700 deposit payments doesn’t sound like much, keep in mind that each passenger will likely pay $225,000 per ticket to fly into space with Virgin Galactic. That could add up to a massive revenue influx for the company.
The company expects that Virgin Galactic’s first commercial flight will take place in the first quarter of 2021. Musk is probably delighted that Virgin Galactic won’t likely be sending tourists into space this year.
Additionally, Musk’s company made significant progress when it successfully launched NASA astronauts into space via SpaceX’s Demo-2 mission. On the other hand, Virgin Galactic already has two spaceships as well as plans to build three more by 2023.
Plus, Virgin Galactic has something that SpaceX doesn’t: Michael Colglazier in the CEO position. Highly experienced at developing multi-billion-dollar businesses, Colglazier earned his stripes as the president and managing director at Disney Parks International.
The Bottom Line
SPCE stock’s value proposition won’t be immediately obvious after scanning the company’s current financial stats. Additionally, there’s competition from SpaceX to contend with.
That should all be fine with adventurous traders who believe in the future of luxury space tourism. Virgin Galactic should post strong revenues eventually, much to Musk’s chagrin and patient investors’ delight.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
