The last time I wrote about Virgin Galactic (NYSE:SPCE) was in late August. At the time, I argued that SPCE stock was worth buying for the long haul despite the dilution of a $460-million secondary offering.
Up 18.8% from Aug. 25 through Oct. 2, the stock got most of its push from two analyst upgrades, InvestorPlace’s William White wrote on Sep. 28.
“The first buy rating for Virgin Galactic stock comes from Bank of America analyst Ron Epstein. He says that no other company that the firm covers has ‘anywhere near comparable growth potential,’ to SPCE stock,” White said.
The second buy rating — Susquehanna analyst Charles Minervino recently initiated coverage of Virgin Galactic at a “buy” — is based on the analysts’ belief that demand for space travel will be out-of-this-world hot.
It’s hard to argue with either observation.
That’s why in my last article about SPCE, I called it a long-term buy. Sometimes, the best investments defy traditional valuation standards. Virgin Galactic is one of those times.
More Analysts Will Jump on SPCE Stock
MarketWatch says there are seven analysts currently covering SPCE, including Epstein and Minervino. All seven analysts have a buy rating on its stock with an average target price of $25.43.
Three months ago, only three analysts were covering the space tourism company. This time next year, I could see the analyst coverage double from where it is today.
According to the mean analyst estimate, Virgin Galactic will lose $1.21 a share in fiscal 2020 and 69 cents in fiscal 2021. In the upcoming third quarter, analysts expect Virgin Galactic to lose 27 cents per share. Those really aren’t horrific numbers for a company that’s looking to send people into space.
Recently, InvestorPlace’s David Moadel discussed Virgin Galactic’s countdown to profits. He believes that the total addressable market of 2.4 million high-net-worth individuals makes SPCE an excellent long-term pure-play buy. I couldn’t agree more.
He also points out some other analysts who are on board the Virgin Galactic moonshot. Across the board, analysts have bought into Richard Branson’s vision for commercial space travel. Only something unforeseen is likely to drive SPCE off course.
Currently trading above $20, my InvestorPlace colleague, Ian Cooper, stated in mid-September that the company’s stock could shoot into orbit on or around Oct. 22, the date of Virgin Galactic’s next test flight.
“If Oct. 2020 test flights are successful, Virgin Galactic has said it plans to start flying by the first quarter of 2021. That could potentially fuel a multi-year boom for the Virgin Galactic stock,” Cooper wrote on Sep. 15.
As Cooper suggests, the market for hypersonic flights to different parts of the world could be an even bigger piece of business for Virgin Galactic than commercial space flights.
Together, the dual revenue streams make it difficult not to get excited about the company’s future.
The Bottom Line on Virgin Galactic
“As someone who’s always respected Virgin Group founder Richard Branson, the fact that Virgin owns 58.7% of Virgin Galactic suggests to me that if it’s not successful commercializing space flight, it won’t be from a lack of trying,” I wrote on March 11.
“Yes, SPCE stock is speculative at this point in its history. However, since it’s down 56% in less than a month, buying shares now is much easier to justify.”
It’s up more than 27% since then.
However, Branson’s stake through his Virgin Group holding company has dropped from over 50% in May to 29.7% at the end of July to raise cash for some of the other companies affected by the novel coronavirus such as Virgin Atlantic.
Make no mistake. The billionaire’s still very much a part of Virgin Galactic. As long as he is, I think you’ll see more analysts jump on board in the coming months.
It’s just another reason I believe SPCE stock is one of the best speculative buys listed on a U.S. stock exchange.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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.