In late September, I suggested that space tourism start-up Virgin Galactic (NYSE:SPCE) has a sizable prospective clientele of high-net-worth individuals. As a result, I made a hearty recommendation in favor of SPCE stock for bold, patient and risk-tolerant investors.
The SPCE stock price posted gains after I made that recommendation. However, I am not ready to advise taking profits yet. My outlook, both then and now, is bullish for the long term.
On the other hand, not everyone is as bullish as I am when it comes to SPCE stock. Some traders dumped their SPCE shares in mid-October because they had doubts about Virgin Galactic’s space-flight timeline.
We’ll certainly address that concern, but I wouldn’t say that it should dissuade current and prospective shareholders of SPCE stock. Besides, an upgrade from analysts at a well-known financial firm ought to bolster the bull case for SPCE.
A Closer Look at SPCE Stock
During the first half of October, SPCE stock maintained a slow but steady upward trend. As a result, SPCE looks like it might be ready to break through and stay above the $25 resistance level that’s been in effect for half a year.
The bulls attempted to push SPCE stock above $25 in July. They got SPCE above that level briefly, but they couldn’t keep it there. It’s not hard to imagine that the bulls will prevail sooner or later.
Keep in mind that SPCE stock has been as high as $42.49. With one piece of good news, SPCE could get above $40 again at some point.
Swing traders might consider a strategy of buying SPCE stock every time it dips to $15, which has happened multiple times in the past. On the other hand, long-term investors can simply accumulate SPCE share in anticipation of much higher prices in 2021.
Casting Doubt
When a company is as ambitious as Virgin Galactic, there will always be issues and concerns. Therefore, the naysayers will never run out of ammunition.
A case in point is when Virgin Galactic founder Richard Branson recently provided an update concerning the company’s next steps for its SpaceShipTwo powered test flights.
In September, Virgin Galactic had already applied for a multi-year Federal Communications Commission license. The window for the SpaceShipTwo test flights was set to open on Oct. 22.
Branson’s update on this, however, cast some doubt on the exact date of the test flights:
“We expect our first spaceflight from Spaceport America to occur later this fall and we are pleased to confirm that we are still on track to meet this time frame… Although preparations are going well, we are not quite at the stage where we can confirm specific planned flight dates for either our VSS Unity or VMS Eve test flights.”
Stay Calm and Hold Your Shares
If your time horizon for holding SPCE stock is truly long-term, then this disappointing update shouldn’t scare you. It’s perfectly normal for delays to occur in space flight programs. After all, there are safety and regulatory issues to contend with here.
It’s possible that the test flight window will be moved to next year. Even if that happens, Virgin Galactic will remain on the forefront of the space tourism market. It’s a unique business founded by a visionary with a track record of turning ideas into highly profitable companies.
If you decide to stay the course with SPCE stock, you’ll be in good company. In fact, not long ago Bank of America analysts initiated their coverage of SPCE with a “buy” rating.
Not only that, but they assigned an ambitious price target of $35 to SPCE stock. With that, the Bank of America analysts opined that “SPCE’s growth potential is unparalleled vs. our coverage (of current potential) and the current nascent stages of the company provide investors with a unique entry point into the stock.”
The Bottom Line
You have a choice when it comes to SPCE stock. You can listen to the doubters, or you can stay the course and hold your shares.
Virgin Galactic is a bold and visionary company, and unique endeavors often encounter delays. There’s no need to let life’s speed bumps get in the way of a perfectly good investment. Therefore, I don’t advise that shareholders sell their shares of SPCE stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
