Is Virgin Stock A Buy?

Ark Invest’s Latest ETF Announcement Is Great News For Virgin Galactic

There are few investors more influential than Cathie Wood right now as her ARK ETF sets Virgin Galactic stock alight.

Most of you have likely heard of Virgin Galactic (NYSE: SPCE) already — the world’s first publicly traded space tourism country, backed by British mogul Richard Branson.

If you haven’t then you’re probably just not that into space, which is fine too. 

However, one important figure is getting into space, and that’s Cathie Woods, founder, CEO, and CIO of ARK Investment Management, one of the most successful investment management firms. ARK regularly outperforms the market with its sector-specific ETFs. The Ark Innovation ETF returned close to 170% in 2020, versus the S&P 500’s 16%. Wow!

So, it turns out that Ark now plans to add a “Space Exploration ETF” under the ticker ARKX, according to a securities filing on Wednesday. Naturally, Virgin Galactic has seen its stock soar 24% in just 2 sessions because of this.

But what does this mean for Virgin Galactic? 

The Space Exploration ETF will focus on companies that are “leading, enabling, or benefitting from technologically enabled products and/or services that occur beyond the surface of the Earth,” according to Ark’s filing.

Well, while no confirmation of what companies are being added to the ETF has been given yet, it seems highly likely that Virgin Galactic will get the nod. There just aren’t that many publicly traded companies that offer exposure to space exploration right now, with the other galactic players innovating mostly around defense contracts. Many of the top competitors to Virgin Galactic are still privately held, most notably Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin. This means that Virgin Galactic is the only real contender for a substantial spot in this exclusive club for now.

The space industry grew steadily in 2020 despite delays due to the COVID-19 pandemic. A record 1,200 satellites were launched, a manned SpaceX trip to the International Space Station took place, and the industry hit a record value of $350 billion. The sector is expected to grow at a CAGR of 4.3% between 2020-2027. More space companies plan to enter public markets in the year ahead, such as Voyage Space, while SpaceX is rumored to be considering an IPO this year. At the current rate that SPAC’s are churning out public debuts, anything is possible right now.

In reality though, things haven’t even started yet for Virgin Galactic. It recently revealed that by December 31, 2020, it had reached close to 900 waiting list applicants for its next sale of commercial flight seats, while in Q2 last year, it had 700 refundable deposit payments from prospective passengers under the program, up from 400 in Q1.

The company will reopen ticket sales following its first official commercial flight later this year, upon which Richard Branson will also embark.

Until then, addition to Cathie Woods’ exclusive group could be worth hundreds of millions, as well as shore up some confidence going forward. For now, we’ll have to wait and see, but I for one am very excited about the prospect of an Ark-led space ETF. Virgin Galactic investors should be too!

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