I have long been a believer in Virgin Galactic (NYSE:SPCE). SPCE stock has been volatile, but has rewarded both bears and bulls over the past year.
Before the novel coronavirus came along, Virgin Galactic stock caught a huge wave of momentum. It squeezed the shorts and ran all the way to $42.49. Once investors began dumping the indices though, they dumped SPCE stock more than twice as fast.
Shares fell 78.7% in 27 calendar days. Talk about a beatdown!
In any regard, we’ve seen the stock recover since those days. And as I’ve mentioned, both longs and shorts have been able to enjoy the volatile ride. The question now becomes, is SPCE stock still a viable speculative play?
Virgin Galactic as a Spec Play
Virgin Galactic being a spec play is both the reason why I like the stock and why I no longer hold it.
The company has a lot of positives working around it right now. Many investors are familiar with SPCE stock for its ambitions to launch space tourism. While it still sounds like a far-off reality, the truth is, the company is closer than you think.
It has obtained 24 of the 29 FAA milestones required and the company believes it only needs one or two more flights to complete the rest. The next test flight is planned for around October 22. If both flights succeed, the commercial business could fire up in Q1 2021.
To me, space tourism represents more of a “when not if” scenario. However, it’s Virgin’s other opportunities that have me excited as well.
The company has partnered with NASA on more than one occasion. The latest involves an agreement with NASA’s Johnson Space Center. The goal is to encourage commercial space flight to the International Space Station. The company will:
“Develop a new private orbital astronaut readiness program. This program will include identifying candidates interested in purchasing private astronaut missions to the ISS, the procurement of transportation to the ISS, on-orbit resources, and ground resources.”
A prior agreement with NASA (announced in Virgin’s Q1 earnings report) formed an agreement to “enable the development of high speed point-to-point technologies.”
Outside of space tourism, this could be a major revenue driver in the future. While these technologies and businesses will take time to play out — and are admittedly, higher risk — they also present major opportunities if they succeed. After all, that’s what makes a spec, a spec.
Trading SPCE Stock
Click to Enlarge
If you’re not into specs or don’t have room for them in your portfolio, SPCE stock is likely one to pass on. I was long Virgin for a while, but after the monstrous move in tech and with a desire to add exposure to other stocks and raise a little cash for a rainy day, I simply didn’t have room to accommodate it anymore.
Now, if the fundamentals justify it or if we get a potential correction in the market, I am willing to change my mind and give Virgin Galactic another look.
Earlier this month, UBS initiated coverage on the stock with a $25 price target. The analyst said Virgin Galactic is uniquely set to benefit from an industry that could be worth $38 billion per year by 2030.
For those that find SPCE stock attractive as a spec holding, the technicals are decent. Not great, not terrific, but decent.
On the one hand, the stock has recovered the 20-day and 200-day moving averages. Specifically, the latter has been a major support mark since April, although it did falter momentarily this month when the indices were under pressure.
If the stock closes below the 200-day, it puts the September low in play at $14.86. That level exists near the summer lows, too. Below $14 is where SPCE stock can get into trouble, putting $12 or lower potentially on the table.
If support holds, bulls really want to see a rotation up through the 50-day and $20. Above $21.50 puts $26-plus back on the table.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
