Virgin Galactic (NASDAQ:SPCE) stock is on an upswing; shares have risen 20% over the past couple of weeks. It’d be easy to say that SPCE stock is simply up because the stock market is surging. But that’d be shortchanging the company.
Virgin Galactic scored a pair of upgrades to help power the momentum as well. Both Bank of America and Susquehanna upgraded shares of the space company. Bank of America was particularly upbeat, as it claimed that the stock could double. It’s part of the favorable momentum that is building for Virgin Galactic heading into 2021. However, before getting too comfortable, it’s worth considering the impact of a new publicly-traded space company and the effect it will have on SPCE stock.
Virgin Galactic Stands Out From The SPAC Crowd
The last time I wrote about Virgin Galactic, I highlighted the company’s credibility. In the wake of the Nikola (NASDAQ:NKLA) scandal, investors may be taking a closer look at other high-profile special purpose acquisition (SPAC) companies. Fortunately, Virgin Galactic has made the right moves to be a serious competitor. Most notably, by bringing in a new chief executive officer (CEO) from Disney (NYSE:DIS), it proved that Virgin Galactic is in this for the long-haul.
That move has paid off; Virgin Galactic shares have jumped more than 20% in recent weeks. This came in large part because Bank of America issued a $35 price target for SPCE stock. Bank of America was particularly enthused as it sees revenues getting going in 2021, and says that Virgin Galactic has far better growth prospects than much of the rest of its coverage universe.
Momentus Adds More Fuel To The Space Sector
Virgin Galactic investors got an ambiguous piece of news earlier this month. There is a new space company coming to American capital markets, also via a SPAC. Stable Road Acquisition (NASDAQ:SRAC) will be acquiring space delivery company Momentus.
You may be asking what a space delivery company is; well, I’m glad you asked. Momentus intends to handle “last mile” deliveries for spacecraft. Its lead product, the Vigoride, is designed to shuttle satellites off of rockets and take them out to their intended orbiting locations. As of now, Vigoride has done limited test demonstrations but hasn’t yet been proven on a commercial level. The company uses sketches of its product in space, which after the Nikola fiasco, may give investors pause.
However, we should know more about Vigoride’s capabilities shortly. Momentus intends to send the Vigoride out on its first mission in December, when it will embark with the SpaceX Falcon 9 in December.
This is promising for SPCE stock owners on the one hand because it pushes forward the development of space as an industry. The more companies you have dedicated to space, the more individual sector exchange-traded-funds (ETFs), industry analysts, and market attention you’ll get for the sector. That, in turn, will boost visibility for Virgin Galactic.
On the other hand, it’s more competition for investing dollars. When Virgin Galactic went public, it was the only way to invest in a pureplay space company. Now, more and more rivals will be vying for that capacity. On the whole, this is probably a plus for SPCE stock. However, with other publicly-traded companies joining the sector, Virgin Galactic’s management will have to focus on execution to keep investors satisfied.
SPCE Stock Verdict
With Virgin Galactic up from $17 to $21 in recent weeks, the value proposition isn’t quite as strong as it was. And despite positive steps that the company has taken, this is still a high-risk story. Any mishap with one of their test flights could prove disastrous for shareholders, for example. So don’t mistake Virgin Galactic for a blue chip holding.
However, if you like the story, there’s still merit to the bull case for SPCE stock. Particularly as peers such as Momentus list, it offers more visibility into the sector as a whole, and should give a favorable halo effect to Virgin Galactic as well. Bank of America sees upside to $35/share. If it gets anywhere close to that, current shareholders will have a fine trade on their hands.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.