Is Virgin Galactic (NYSE: SPCE) a good investment? The stock is back on the rise and hype abounds around Richard Branson’s space start-up.
It is one of the stocks we get asked about the most here at MyWallSt, and for good reason — depending on who you ask. However, if you had invested in Virgin at its height in January, your investment would be down close to 60%. So what’s with all the hype?
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Virgin Galactic’s financials
In its most recent earnings report, things looked as sparse on the revenue front as ever. With three test flights still to go before commercial flights can begin — following a successful May 22 test flight — the company is still a ways off making money.
Virgin Galactic had no revenue in either of the past two quarters and reported a net loss of $55.9 million in Q1 of 2021, down slightly from the $59.5 million loss in Q4 2020. Virgin Galactic plans to have three flight-ready spaceships by the end of 2021, with three more test flights to go before commercial rips can begin. It hopes to have five spaceships and operate 270 flights a year by its fourth year of commercial operations, which is projected to take in $590 million in revenue, while gross profit will stabilize at approximately 70%.
A Virgin investment isn’t just about space…
The real value behind Richard Branson’s ‘space-tourism’ venture lies in the potential of Virgin Galactic to disrupt the muti-trillion dollar airline industry by offering ultra-fast flights around the world.
Despite officially being a space tourism company, Virgin is at its core, a travel business. With this in mind, the ambitious company could build itself a moat of being the only travel company that offers hypersonic point-to-point air travel (with a few trips to space thrown in for good measure).
At a time when the duopoly of Boeing and Airbus finds itself in turmoil over grounded planes and corruption cases respectively — with a side of pandemic thrown in for good measure— the thought of a disruptor in the aviation industry has investors intrigued. That aside, its space potential remains vast.
With more than 600 people already signed up to fly to space at $250,000 per head, the company claims to hold almost $80 million in deposits. However, one must wonder how much wider the audience would be for supersonic travel across the globe at a fraction of the cost? A 2020 survey found that four in ten people with a net worth of over $5 million would be interested in buying a ticket. This means there is a total addressable market of approximately 2.4 million people.
It has also entered into a ‘Space Act Agreement’ with NASA’s Johnson Space Center to facilitate commercial participation to the International space station. These expeditions could range from private to scientific research and is another lucrative opportunity for the company.
We Musk talk about Virgin’s competition…
Of course, Virgin Galactic is not the only horse in this race. Elon Musk’s SpaceX, which intends to spin off its space-internet business Starlink and pursue an IPO, has made giant leaps for mankind (ba dum tss) in space exploration already.
SpaceX’s main goal is to create an affordable market for space transportation that will eventually allow the colonization of other planets through a series of space vehicles, including the Falcon launch vehicles and Dragon spacecraft family.
Slightly different to Virgin, but with similar potential. Musk’s space ambitions are a bit behind Branson’s on the tourism front, and there’s no denying that he must be truly sickened to have missed out on getting that awesome ‘SPCE’ ticker. Not only that, but Tesla doesn’t even have sponsored space suits yet like Virgin, who had a range of special blue jumpsuits manufactured by sportswear manufacturer Under Armour.
There is also Jeff Bezos’s Blue Origin to consider, which will likely begin to hit another gear as the Amazon founder steps down from his role as CEO of the e-commerce firm in Q3 this year. With such a titan of industry devoting his full attention to space exploration, Virgin will be even quicker to look over its shoulder.
So, is Virgin Galactic a buy?
By all traditional metrics, Virgin Galactic is a ludicrously over-priced and over-hyped stock. Investors pour in while it proceeds to make no money whatsoever. Yet, should a company that calls itself “the world’s first commercial space line and vertically integrated aerospace company” be judged by traditional metrics?
I’ve used the word potential in this article 5 times, and while that may sound like I’ve left my thesaurus at home, it’s to reiterate what an investment in Virgin means. An investment in Virgin Galactic is an investment in potential, pure and simple. Are you paying over the odds at the minute? Probably, but with a company like this, the sky is no longer the limit.
For an in-depth look at this stock as an investment, listen to MyWallSt Co-founder, CEO, and SPCE bull Emmet Savage discuss the future of space investing here.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Under Armour, Tesla, and Virgin Galactic. Read our full disclosure policy here.
Content Manager at MyWallSt
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.