What is Virgin Galactic (NYSE:SPCE) stock worth? It’s obviously the most important question an investor can ask. And the answer, truthfully, is unknowable.

After all, Virgin Galactic is an early-stage startup burning through massive amounts of cash. It is targeting an industry, space tourism, which for all intents and purposes doesn’t exist at the moment.

SPCE stock could be one of the great investment opportunities available. The company could go bankrupt. Any investor who believes they know for certain the future of this company is fooling themself.

That said, just because the valuation is unknowable doesn’t mean it’s immaterial. Some investors in SPCE stock already have learned that lesson the hard way, as shares declined sharply amid this broad market sell-off.

And after that sell-off, I do believe SPCE stock at the least is intriguing. But if there is one aspect of Virgin Galactic stock that is certain, it’s this: this stock is only suitable for a small portion of an investor’s portfolio that focuses on the highest-risk, highest-reward investments.

The SPCE Stock Roller-Coaster

SPCE stock only began trading on the New York Stock Exchange in late October, after a reverse merger with SPAC (special purpose acquisition company) Social Capital Hedosophia. Trading in the stock since then has been volatile, to say the least.

SPCE stock got a bounce above $12 in early trading and then started falling in what was still a bull market. By December, the stock was below $7.

And then traders rushed in: shares would gain over 400% in a little over two months, reaching a high of $37 in February. The stock, as of this writing, trades back below $12.

It’s clear in retrospect that there was something of a bubble in SPCE stock last month. In fact, it was clear to many at the time. The stock at the highs was among the most widely-held on free trading platform Robinhood. Right at the peak, retail investor volume topped that of names like Tesla (NASDAQ:TSLA) and Apple (NASDAQ:AAPL).

The trading was reminiscent of the crazy ride in Beyond Meat (NASDAQ:BYND) after its 2019 initial public offering, or the parabolic and quickly-reversed gains in cannabis company Tilray (NASDAQ:TLRY) the year before. Those bubbles popped, too.

The Downside Risk

And there’s no reason, particularly in this market, why SPCE stock can’t fall further. Again, the stock touched $7 less than four months ago. Despite the big declines, shares actually have performed well in this ugly 2020 market: shares are up 1% year-to-date as of this writing.

And the coronavirus crisis should and will hit Virgin Galactic going forward. The odds of a recession are quite high — and this is a company targeting the super-rich. Virgin Galactic is trying to make “space tourism” affordable: the only way for civilians now to get to space is via a privately held broker called Space Adventures. Their price tag usually exceeds $20 million.

Virgin Galactic, in contrast, is hoping to charge $250,000 per trip. In its fourth quarter earnings presentation, the company noted it would focus on individuals with a net worth over $10 million, who presumably could afford that expenditure. In a recession, there simply are going to be fewer of those targets. Some will see their wealth decline along with their portfolios. Others that own private businesses may see pressure.

There’s also the issue that Virgin Galactic is going to have to raise more capital. The company closed 2019 with $480 million in cash. It burned $223 million last year. Revenue was just $3.8 million, the bulk of which came from engineering services, according to the company’s Form 10-K filed with the U.S. Securities and Exchange Commission.

Virgin Galactic will have to sell a significant amount of stock over the next decade simply to fund itself to the point where it can drive regular spaceflights. There’s nothing that guarantees it will be able to sell that stock over the current $11.66 share price, let alone over $10.

The Opportunity

We know that there are short-term and long-term risks in SPCE stock. Bear in mind that one tragedy on a flight could well end the business.

But the decline from $37 to $12 also helps the case for the stock. Again, Virgin Galactic went public via a reverse merger with a SPAC, rather than executing a traditional initial public offering. And in that merger, Virgin gave up about half its company at a price roughly around $10 per share.

That alone is a reasonably important data point to suggest that a price over $20, let alone $35, was far too high. As our Matt McCall pointed out last month, investors trusting the acumen of Virgin’s billionaire founder Richard Branson would have to ask why he’d sell half his company at $10 per share if it was “really” worth $30.

And with a market capitalization now closer to $2 billion, the potential upside is obvious on its face. It’s not just space tourism that Virgin Galactic hopes to target. The company can bring payloads into space. It hopes to offer hypersonic travel between major cities.

There are two key competitors: SpaceX, founded by Tesla chief executive officer Elon Musk, and Blue Origin, backed by Amazon (NASDAQ:AMZN) founder Jeff Bezos. But if Virgin can beat those competitors to market, it can dominate an industry that literally might grow for the rest of this century.

In that scenario, it’s not hard to imagine the market value of SPCE stock rising by multiples of the current valuation. If Virgin Galactic can win, SPCE could be one of the great investment opportunities available at the moment.

How to Play SPCE Stock

Obviously, that’s a huge ‘if.’ And investors need to keep that in mind. This is a stock for ‘fun money,’ which should see volatile trading for years.

In fact, investors should heed the advice of Branson himself. When Virgin Galactic hit the NYSE in late October, the billionaire told CNBC:

If the public wants to dabble a little bit in a spaceship company, own a little bit of a spaceship company, they can now do so.

The key word there is “dabble.” This is not a stock around which to build a retirement portfolio. It’s a stock that provides ownership of “a little bit of a spaceship company.”

That’s fun. It’s exciting. It could be enormously profitable. What it is not is a safe investment with no downside risk.

Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets. He has no positions in any securities mentioned.