Virgin Galactic (NYSE:SPCE) just announced its Q3 earnings on Nov. 5, including news about its first spaceflight from its New Mexico based Spaceport America. This launch will be good news for SPCE stock since it will include its first revenue payload from NASA.
Moreover, and probably more importantly, the company will reopen space ticket sales in 2021 following Sir Richard Branson’s flight (yet unscheduled).
However, reports are that the company hopes to accomplish the Branson flight sometime in Q1.
This could turn out to be quite popular for wealthy flyers who can afford the high ticket price. As far as I can tell, that ticket price is still not listed but it is bound to be quite high. However, reports from the company were that the base price will be $250,000 per person who signed up early and could climb substantially from there.
In fact, the company started a “cut in line” program called One Small Step. It allowed anyone with a $1,000 deposit to bump to the front of the line with confirmed reservations, once they reopen ticket sales.
This apparently caused a stampede. Virgin Galactic decided to end that program with the announcement of Q3 earnings. Apparently close to 900 people had signed up.
Existing customers, who have already signed up and paid for their reservations, before ticket sales were closed, total 600 people. Virgin Galactic calls these people “future astronauts.” They get to spend a few minutes in spaceflight once the company launches its commercial service.
Financial Issues and Risks
On the financial side, Virgin Galactic reported continuing losses, as might be expected. It lost $77 million on zero revenue. This was higher than the $62.5 million lost in the June quarter and $51.5 million negative income last Sept.
However, the company still has $754 million in cash as of Sept. 30. This includes the money raised from its $19.50 per share capital raise during the quarter. That equity offering brought in $440 million, which is part of the existing cash balance.
Therefore, this shows why earning revenue from NASA with this upcoming flight is so important. It will help the company defray costs until it can start its commercial operation. So far the company has not earned any spaceflight revenue this year. It previously has had two other flights in February and December of 2019 where they earned payload flight revenue.
There is one more risk that investors should take into consideration. You would not know this by reading the company’s financial or even their 10-Q filing. That risk is very simple: catastrophic failure.
That is what happened on Oct. 31, 2014. Its previous aircraft, the VSS Enterprise, broke up mid-flight and crashed in the Mohave desert. It resulted in the death of one pilot and serious injury to another.
If anything like that happens in the next upcoming flight, including any kind of technical hiccup that is safety-related, SPXE stock will tank. The company could also find it extremely difficult to operate going forward, especially if the FAA or NASA withdraw from authorizing future flights.
To put it bluntly, the future of the company is on the line every time it conducts a new spaceflight. There have been two successful flights since that crash. But this is a very important risk all investors need to keep in mind.
What to Do With SPCE Stock
So far this year, SPCE stock is up almost 75% as of Friday, Nov. 6 to $19.03. Moreover, the stock has doubled over the past year.
However, in the past six months, since the Covid-19 pandemic has taken over, SPCE stock is up just a little more than 3%. So you can see some investors are more than a little cautious about Virgin Galactic’s prospects.
Nevertheless, Wall Street analysts are still ebullient on the stock. For example, TipRanks.com reports that 6 analysts that have written up SPCE stock in the last three months have an average price target of $25.oo per share. That represents a potential gain of 31.4%.
In other words, most of these analysts have similar target prices, roughly about 31% above today’s price. So there seems to be some room for SPCE stock to fly higher, despite its losses.
On the date of publication, Mark R. Hake did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.