Not all jaunts into space, my friends, are rocket rides. Witness the journey of Virgin Galactic (NYSE:SPCE). SPCE stock is still trying to regain the same altitude it reached in February. Back then, it hit an interstellar peak of $33.87 per share…until this little buzzkill called the novel coronavirus came into its flight path.
Yet since, Sir Richard Branson — who inspires as much adoration as fellow billionaire space junkie Elon Musk of SpaceX — has set his orbital venture spinning in the right direction. With SPCE stock up 56% since Sept. 1 (and 256% year over year), you have to wonder whether he’s going to time things ideally. That is, will his company hit escape velocity while terrestrial travel sags and space travel remains a niche without competitors?
What’s more, the economic woes that dog Joe and Jane Tourist will hardly affect Worthington Bigbucks when he’s ready to fly. Maybe shareholders will join him for the ride of a lifetime — assuming, of course, that the current liftoff turns into full-tilt thrust.
SPCE Stock on Rocket Fuel
Speaking of liftoff, Wall Street is abuzz over speculation that Virgin Galactic will conduct test flights before Christmas. Energized by this conjecture, SPCE stock jumped almost 17% between Nov. 20 and 27.
It wouldn’t be surprising if it happens, because market watchers and space enthusiasts have waited at least since mid-November. Back then, Virgin Galactic delayed its SpaceShipTwo trial runs because of pandemic concerns in New Mexico, where the craft is slated to take off from Spaceport America.
With cases of the novel coronavirus dropping statewide, investors have already made the conceptual leap to Gov. Michelle Lujan Grisham lifting stay-at-home orders for residents and stay-on-Earth restrictions for slick spacecraft. As this remains far from a given — especially after millions defied warnings to avoid Thanksgiving travel — SPCE stock could lose those recent gains quickly.
Rally and Reality
And since a possible test flight is exactly that, I’m not sure continued anticipation will lift SPCE stock into the stratosphere. Looking back, let’s keep in mind that Branson and his team have been at this for 16 years, with Sir Richard predicting early on that a maiden flight would come in 2009.
To be 110% fair, Branson can’t exactly nick the blueprints and spark plugs from a retired space shuttle and call it good. Creating a market segment that mixes off-planet travel and tourism equates, if you will, to building the space plane as you’re flying it. At least Virgin Galactic named a tourist-savvy CEO in July: Michael Colglazier, who served as a theme park executive at Disney (NYSE:DIS).
Meanwhile, SPCE stock has kept the excitement going in other ways. You can actually book a flight at the Virgin Galactic website. But get in line: So far, the waiting list runs more than 600 deep and SpaceShipTwo seats just six. Final cost for your joyride? $250,000, the same as an average-priced home in St. Paul, Minn. At least there’s good news to head off the cold feet: $1,000 flight deposits are refundable.
Virgin Galactic as a Long Play
Assuming you get that refund, don’t dump it all into SPCE stock without a second thought. Dating to the 2000s, Virgin Galactic has constantly, almost consistently, moved the target date for its first commercial launch, currently slated for early 2021.
Also remember that with zero such flights, the safety data on Virgin Galactic is as empty as space itself. It only takes one mishap to sideline such a venture indefinitely, and the company suffered a massive setback in the aftermath of a 2014 crash that killed co-pilot Michael Alsbury.
I’m counting on Virgin Galactic to hit more delays in 2021 but still think the stock deserves serious consideration. UBS projects that space tourism could grow to a $38 billion per year industry by 2030 and if that comes to pass, SPCE stock may well benefit more than any other investment out there.
Give yourself at least a few years, then, to realize all Virgin Galactic could have to offer. Just think: If you invest enough and make enough, you might have enough to snag a ticket on SpaceShipTwo — and boldly go where no investor has gone before.
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.