Take Advantage of Short-Term Catalysts With Virgin Galactic Stock

Richard Branson and a crew of three others grazed the edge of space earlier this month, achieving a dream 17 years in the making. It was time to rejoice. Virgin Galactic’s (NYSE:SPCE) first launch into space was impressive. SPCE stock also gained handsomely in the runup to the event.

But the joy was short-lived. Virgin Galactic, which trades under the ticker SPCE, fell 17.3% after it filed a notice on July 12 to sell up to $500 million of common stock with the U.S. Securities and Exchange Commission (SEC). (The shares have tumbled roughly 25% since then.)

Some analysts were hoping for a  stronger post-launch announcement on the timetable for space tourism. Instead, we had to make do with an extensive press conference and a musical performance by R&B star Khalid.

Speaking to CNBC, Branson said his recent trip into space was “the most incredible experience of my lifetime,” and that the company needs to build “a lot of spaceships” to meet future demand for spaceflight. But there was no news about reopening ticket sales.

The flight was a major milestone for the company. But insiders are selling shares, and the competition in the space race is getting intense.

In a classic case of, “Buy the rumor, sell the news,” SPCE stock has fallen from its lofty heights. But now that the dust has settled, it is the perfect time to get back in the game for retail traders. In the last month, SPCE stock has shed nearly 30%.

It will only take a few positive press releases and announcements to reverse the situation. But SPCE stock is a good fit only for short-term traders.

SPCE Stock Is the Only Game in Town

The space tourism industry is on fire these days. In a story straight out of science fiction, Richard Branson and former Amazon (NASDAQ:AMZN) chief Jeff Bezos are competing in a billionaire space sprint.

Branson departed Earth on Sunday, July 11, just 12 days before fellow billionaire Jeff Bezos enjoyed  his own extraterrestrial excursion.

Alongside his brother, Bezos rode on the first New Shepard rocket to carry passengers on July 20. The journey was arranged by Blue Origin, the privately funded aerospace manufacturer and sub-orbital spaceflight services company that Bezos founded in 2000.

Elon Musk is not to be outdone. His space technology company, SpaceX, has already launched NASA astronauts into space and is planning to send its first “all-civilian” crew to space at the end of 2021.

Musk himself has yet to embark on an expedition. He seems to be preoccupied with cryptocurrencies and Tesla’s (NASDAQ:TSLA) issues back on Earth.

However, out of all these three companies, Virgin Galactic stands out. For investors who want to buy stock in this sector, SPCE stock is their only answer. No other major space exploration enterprise is publicly listed.

But one has to understand that these companies will go public in their own sweet time. It’s not like Jeff Bezos and Elon Musk need money. For now, they can afford to finance their space ventures by themselves.

But if they decide to tap the equity markets, investors will lap up their stocks. Looking ahead, if space stocks raise a great deal of money, more companies will throw their hats into the ring. Branson himself believes the space market can support 20 companies.

Insider Sales Do Not Instill Confidence in Virgin Galactic Stock

Virgin Galactic went public through a reverse merger with Chamath Palihapitiya’s Social Capital, long before SPACs became very popular.

The deal involved an approximately $800 million investment by Social Capital for a 49% stake in the merged entity. In total,  Virgin received  proceeds of $630 million.

Over the last year and a half, the stock has swung wildly. After the previous successful test flight, SPCE stock went from $17 to $37 in a month. Taking advantage of the bull run, Palihapitiya exited his entire position in Virgin Galactic in March, selling his shares for $35 each.

Meanwhile, Branson, the company’s founder,  also has been prone to make hay while the sun shines. Branson sold 5.5 million shares of SPCE stock between April 12 and April 14, at prices ranging from $26.82 to $28.73.

Last year, Branson sold up to $504.5 million of his stake in the space-tourism company, in an effort to help Virgin Group’s “portfolio of global leisure, holiday, and travel businesses” that were negatively impacted by Covid-19. Since Branson’s empire is so extensive, he may sell more of his stock if one or more of his entities gets into trouble. That leaves SPCE stockholders in a bad situation.

Exciting Times

For those who grew up watching sci-fi movies, the current landscape is both exciting and surreal. Wish fulfillment in this era has taken on a completely different meaning. But at the same time, when trading stocks, investors have to be practical. It’s tough to make predictions, especially when they involve space exploration.

Considering its uncertain outlook and lack of profits, Virgin Galactic is not a secure, long-term bet. But with the stock down substantially ,SPCE stock is worth buying,  in case Virgin Galactic announces advance reservation data or a new launch.

In the run-up to the launch earlier this month, SPCE stock shot up in anticipation of the event. Retail traders then took profits in the name, which was not surprising. But now traders have a better entry point to take advantage of the company’s short-term catalysts.

On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. Faizan does not directly own the securities mentioned above.


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