Las Cruces, New Mexico-based space tourism company Virgin Galactic (NYSE:SPCE) came to the financial markets in 2019 amid much fanfare and optimism. Founder Sir Richard Branson is a consummate pitchman, and his promotional prowess was evidently enough to propel SPCE stock higher.
However, no asset is meant to go up in a straight line without gravity taking over at some point. Thus, in early 2021 the share price rapidly ascended and, just as quickly, came crashing back down to Earth.
Is this a problem or an opportunity for enterprising investors? The answer depends on your vision of the future of space tourism, along with Virgin Galactic’s position in this niche industry.
At the very least, we can say that there’s one prominent analyst with a strongly bullish stance on the company and its stock. So, let’s dive in and see if Virgin Galactic’s shares still have fuel left in the tank.
A Closer Look at SPCE Stock
After much anticipation, SPCE stock finally became available to the public on Oct. 28, 2019. The stock was launched following Virgin’s merger with a special purpose acquisition company (SPAC), Social Capital Hedosophia.
Virgin Galactic was the first space company to merge with a SPAC, and there was much celebration as the shares catapulted from the $10 level in October 2019 to the $34 area in February 2020.
That level of excitement evidently couldn’t be sustained, though, as SPCE stock ended 2020 slightly below $24.
Then the price action really got wild in early 2021, as the stock shot up to a 52-week high of $62.80 on Feb. 11, only to fall back to $33.14 on March 19.
Now that SPCE stock has retraced from its peak price, it may be possible for investors to take a bullish position in anticipation of another attempt by the shares to reach the $50 and $60 levels.
Targeting 50% and $50
One prominent analyst, Truist Securities’ Michael Ciarmoli, evidently has no problem envisioning Virgin Galactic shares reaching $50 again.
That’s the price target he’s placed on SPCE stock, along with a “buy” rating. Clearly, after the shares closed just under $30 on Friday, Ciarmoli’s target shows that he thinks the stock can jump significantly.
Truist’s analysts appear to be massively bullish not only on the stock, but on the company itself. Reportedly, they forecast that by the year 2030, Virgin Galactic will control 50% of the space tourism market.
I have a funny feeling that SpaceX founder Elon Musk isn’t on board with that prediction. Only time will tell whether SpaceX will be able to muscle in on Virgin Galactic’s market share.
One thing we know for sure, though, is that retail investors can currently buy SPCE stock. In contrast, there’s no established timeline as to when we’ll be able to buy SpaceX stock.
So, to get exposure to the sector, you can either sit around and wait for Musk to list SpaceX’s stock or own Virgin Galactic shares today. For proactive investors, the choice is obvious.
A Cata-List
Truist’s predictions are ambitious, but not unjustified. That’s because Ciarmoli named multiple factors that will enable Virgin Galactic to capture sizable market share.
Among the catalysts cited by Ciarmoli are:
- One of the first market entrants
- Proprietary technology
- Vertically integrated operations
- Successful test flights
- The commencement of commercial operations
- Plans for “a consumer-oriented experience leveraging the Virgin brand”
If Truist’s predictions turns out to be correct, then Virgin Galactic’s commercial start-up could commence operations in early 2022. Moreover, the company could generate close to $1 billion in sales by 2030.
Ultimately, Ciarmoli expects that “demand will significantly exceed supply, providing the company with pricing leverage and enabling margin accretion as the company scales its operations.”
I tend to concur with that assessment. Once wealthy people see their peers bragging about their space trips, I suspect that the market will experience explosive growth – and Virgin Galactic will be a premier player in this expanding market.
The Bottom Line
There’s certainly no guarantee that SPCE stock will reach $50 again. It’s a speculative investment; make no mistake about that.
Nevertheless, visionary investors should be able to imagine a rapidly expanding space tourism market. And perhaps we can imagine Virgin Galactic leading that market, Musk’s ambitions notwithstanding.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
