The travel and tourism industry might not have seen momentum in 2020, but the space industry has certainly gained traction this year. Despite the pandemic, the space industry witnessed an exciting period and is poised for a lot of action in 2021. Virgin Galactic (NYSE:SPCE) focuses on space tourism, and the stock has enjoyed strong momentum in the last few months. SPCE stock is up 113% this year and hit new highs earlier this month. It was trading at $18 in August 2020 and is currently around $50.
According to a report from Morgan Stanley, the global space industry is expected to generate revenues exceeding $1 trillion by the end of 2040. That is a huge rise from $350 billion in 2020. This clearly shows that the sky is the limit for Virgin Galactic. As the company is getting closer to commercial service and with NASA contracts in its kitty, SPCE stock looks attractive and should be on your radar.
With that in mind, let’s take a closer look at the two aspects behind the investment case for SPCE stock.
The Test Flight
Virgin Galactic had previously scheduled a test flight on Feb. 13, which was delayed for additional checks. The company did not provide any details about how long the delay will be, but the test window is open throughout the month. Investors are eagerly waiting for the test flight, and there is a possibility that the delay could be minimal and the test flight could be scheduled very soon.
The shares tumbled 8% after the announcement was made by the company on Twitter (NYSE:TWTR) on Feb. 12. Whenever a company demonstrates success, the stock price surges. That’s why this dip is a good time to make the move and add SPCE stock to your portfolio. A successful test flight would mean the stock will go higher.
SPCE is striving to make space tourism a reality. This flight is a key step for commercial service, and with the beginning of commercial flights, there will be passengers waiting to depart from the company’s commercial space flight facility.
The company already had 600 future passengers as of October 2020, which shows confidence in Virgin Galactic. Tickets cost $250,000, and even if we assume that the commercial flights do not start at full capacity, there will be notable passenger revenues even at half capacity. After a few successful flights, the confidence of high-net-worth individuals in Virgin Galactic will rise, and there will be an increase in passengers.
The company will open ticket sales in 2021 after Richard Branson’s flight. Given that the potential of generating revenue is high, the stock’s upside could be noteworthy.
Contracts With NASA and Rolls-Royce
Virgin Galactic is not restricted to commercial flight development. It has strong ambitions with NASA and signed key contracts in 2020.
Specifically, in May 2020, the company entered into an agreement with NASA to advance high-Mach technology. In June, it signed another agreement with NASA to create a program for consumers who want to go to the International Space Station.
Further, the company signed a Memorandum of Understanding with Rolls-Royce (OTCMKTS:RLLCF) to collaborate on the design and development of engine propulsion technology for Mach 3 aircraft. Even if the company does not begin commercial flights anytime soon, these contracts will continue to give momentum to the stock.
Bottom Line on SPCE Stock
Considering the NASA contracts and the excitement about the test flight, SPCE stock has potential to grow. With the rollout of vaccines, travel could slowly return to normal. Furthermore, commercial service is due to begin this year, which could have a strong impact on growth. The company is not generating any revenue, which makes it hard to value, but considering the potential of space tourism, this stock could soar and generate life-changing returns.
These factors add up to one thing — SPCE stock has strong growth prospects, and if added to your portfolio, it could provide you with an exciting ride to space. The company will announce Q4 and full-year results on Feb. 25. It will likely give investors more perspective about the future of the stock. Currently, SPCE looks promising and has the potential to generate positive returns in the long term.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.
