Virgin Galactic Proves Its Worth As a Strong Speculative Play

We put our chips behind Virgin Galactic (NYSE:SPCE) and we’re seeing that investment pay off, as SPCE stock is now soaring. 

Virgin Galactic (SPCE) billboard on the New York Stock Exchange, across from the Fearless Girl statue. aerospace stocks
Source: Tun Pichitanon / Shutterstock.com

I have been a big fan of Virgin Galactic for awhile now. More than a year ago, it was mentioned in my podcast on Nov. 1 as a solid bet. Why? Because despite the lack of meaningful revenue at this stage, Virgin is the only pure play on the future of space tourism.

In that podcast, it was explained that in order for investors to find those huge multi-bag returns — 300%, 500%, 1,000%, etc. — investors have to be able to look ahead to the future. They have to be able to look at a stock today and justify its value by looking at what it can do tomorrow. 

 Virgin Galactic was one of those companies and the latest run in SPCE stock proves just as much. 

A Look at SPCE Stock

top stock trades for SPCE
Source: Chart courtesy of StockCharts.com

It’s hard to believe that SPCE stock dipped below $10 in March. Shares it a low of $9.06 during the height of the coronavirus selloff. Since then, the stock is approaching a quadruple return as it trades in the mid-$30s.

Keep in mind, this stock hit a high of $42.49 before the pandemic caused a historic rout in the stock market. In a way, the selloff in Virgin Galactic made sense. 

As I just mentioned, the company doesn’t generate any meaningful revenue. In that regard, it’s a speculative play, not an investment based on sound financials and a reasonable valuation. Because of this, SPCE stock fell to the curb when the selloff hit. 

Now though, the stock has momentum as investors take hold of the bull thesis.

A look at the chart highlights the recent momentum others have seen in the stock as well. While a run to the mid-$30s may result in a short-term dip, it’s quite possible that SPCE stock is still just getting started when we consider the longer-term trajectory. 

SpaceX is also making meaningful strides in space. However, its business has more to do with rocket contracts, payload deliveries and satellite services. That’s incredibly cool — but it’s completely different than what Virgin Galactic is doing. Plus, SpaceX isn’t public. 

Even if — or more likely when — SpaceX comes public, the added awareness around space stocks will likely be a net positive for SPCE stock, not a negative. 

The 52-week high is up near $42.50, which is still more than 27% above current levels. If this company can deliver on its goals, it should go much higher than that down the road.

The Long Game With Virgin

What do I mean by, “deliver on its goals?” Put simply, if Virgin Galactic can put customers up in space without seeing a series of significant setbacks. Thus far, it has been moving at an impressive pace. 

The company is on the verge of having FAA approval for its flights. If all goes well, founder Richard Branson plans to be the first customer to fly sometime in Q1 2021. For those that don’t realize how fast this year is going by, Q1 is just a few weeks away. 

In August, the company raised more than $450 million, assuring investors that its balance sheet is well capitalized as it makes its big push. 

Everyone who is bullish on Virgin Galactic is bullish on the company’s space travel potential. I am too. However, I think the “hidden gems” — that aren’t really hidden but aren’t talked about enough — are the deals that Virgin has with NASA. 

The company has multiple deals in place, ranging from tourism to the International Space Station. However, one of the most compelling is its high-speed technologies agreement.

Earlier this year, “NASA signed a Space Act Agreement with Virgin Galactic to collaborate on high speed technologies.” That’s important, as Virgin later announced its Mach 3 aircraft design.

The airline industry continues to grow and while the novel coronavirus put a dent in the travel industry, air travel isn’t going away. If anything, faster travel is going to increase traveling trends. While there is more competition in this area, it could be an area of growth currently unrealized by Wall Street. 

On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.


Article printed from InvestorPlace Media, https://investorplace.com/2020/12/spce-stock-proves-its-worth-as-a-strong-speculative-play/.

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