Virgin Galactic Stock (SPCE): Should I Buy It Now?

By Amit Chowdhry ● October 1, 2020
  • Should you buy Virgin Galactic Holdings stock (NYSE: SPCE) now? Here is some information to help you decide.

This past week, the stock price of Virgin Galactic Holdings Inc (NYSE: SPCE) — which is a company founded by billionaire entrepreneur Sir Richard Branson — was boosted over 20% after Bank of America initiated coverage with a Buy rating and a $35 price target. This had represented an increase of 113% from the closing of the stock price on Friday.

This week, Susquehanna Bancshares also initiated a positive rating for Virgin Galactic with a $20 price target.

Virgin Galactic went public in October 2019 through a special purpose acquisition company (SPAC) called Social Capital Hedosophia, which is linked to a venture firm run by Chamath Palihapitiya. When Virgin Galactic went public, it became the world’s first and only publicly traded commercial human spaceflight company.

While Bank of America issued a high price target on the company, it also warned investors that there are risks associated with the company such as a fatal accident.

Another potential risk for Virgin Galactic is that it does not have much financial or operating history. Determining a valuation could be challenging since there are no directly comparable companies.

But Bank of America also noted that the upside for Virgin Galactic is the lack of competition and the growth potential.

“The long-term opportunities in space tourism and hypersonic point to point travel are nearly revolutionary,” said Bank of America in its report via Business Insider. “Purchasing shares of Virgin Galactic today offers investors the opportunity to get into a company at the very beginning of its growth story. No company in our coverage universe has anywhere near comparable growth potential.”

And Bank of America also noted that Virgin Galactic also has a compelling management team, including Chief Space Officer George Whitesides — who worked at NASA for over 20 years. And CEO Michael Colglazier worked at Disney for more than 30 years.

“Virgin Galactic’s technology and vertical integration capabilities are unparalleled,” added Bank of America in the report. “There is no company in the world that designs and builds its own aircraft end-to-end and then operates that vehicle commercially. In our view, the steps Virgin Galactic has taken over the past decade to vertically integrate somewhat mitigate execution risk.”

Another risk is that the company has no financial or operating history

In an interview with CNBC, two traders said that they are apprehensive about investing in Virgin Galactic now. Laffer Tengler Investments chief investment officer Nancy Tengler said that she would like to see people returned to commercial air flight before spending too much time thinking about the potential and the price of about $250,000 per ticket limits the potential clients. New Street Advisors founder Delano Saporu also pointed out that the company is not profitable yet and commercial operations have not started yet, but he is looking forward to seeing how it plays out over time.

On October 22, Virgin Galactic is going to conduct its next spaceflight test.

Bank of America estimated that the space industry as a whole will hit $1.4 trillion by the end of 2030 compared to the current value of about $415 billion.

Virgin Galactic Stock (SPCE): Should I Buy It Now?

Here is some pertinent information to help you decide whether to buy Virgin Galactic stock:

Analyst Consensus Report #1: 0 analysts say strong buy; 6 analysts say buy; 0 say neutral; 0 say sell; 0 say strong sell

Analyst Consensus Report #2: 0 say sell; 0 say hold; 9 say buy; 0 say strong buy

Virgin Galactic Stock (SPCE) Performance:

Here is how the Virgin Galactic stock price performed over certain periods of time (as of 7:20 AM today):

1-Day: -5.92%

5-Day: +22.3%

1-Month: +10.1%

6-Month: +30.3%

YTD: +66.5%

1-Year: +79.7%

Based on the stock performance, price target activity, and analyst consensus report, I plan to keep increasing my position in Virgin Galactic for the long-haul using a buy-and-hold strategy at various price points.

If you are a more conservative investor, then I would recommend that you invest more in other companies that have had long track records with steady growth.

Disclosure: I have a small position in SPCE. I wrote this article myself and I do not have any business relationship with any company whose stock I write about. I am not a financial advisor and all articles are my opinion. You should do your own due diligence and consider talking to a financial professional before investing.