Virgin Galactic (SPCE) Stock Could Go Higher After FAA Approval

Mohit Oberoi, CFA - Author

Sep. 30 2021, Published 11:09 a.m. ET

Virgin Galactic (SPCE) stock was trading sharply higher in the early price action on Sept. 30 after the FAA allowed the company to resume flights. What’s the forecast for SPCE stock and can it go even higher?

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Virgin Galactic was the first company to go public through a reverse merger with a Chamath Palihapitiya SPAC. The stock has whipsawed this year. It saw a buying spree in the first quarter amid pumping from Reddit traders. The stock spiked again in June ahead of the company’s first successful commercial flight with Sir Richard Branson on board.

Why has SPCE stock been dropping?

However, SPCE stock fell after the successful test flight. It isn't unusual for stocks to fall after a successful event because the event gets priced in before it actually happens. Virgin Galactic also announced a $500 million stock offering which further dampened the sentiments. The FAA’s decision to stop the company’s commercial flights didn't help the stock.

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The stock was also under pressure amid the general sell-off in growth names. There was a massive fall in growth names amid the rise in bond yields.

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Virgin Galactic gets FAA clearance to fly

The FAA was investigating Virgin Galactic’s flight. The FAA grounded Virgin Galactic's flights on reports that the July flight deviated from its assigned airspace. The stock fell after the news. Now, the FAA has completed the investigation and allowed Virgin Galactic to resume its flights. According to the FAA, Virgin Galactic has made the “required changes” to communications when the flight is in operation.

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Virgin Galactic is upbeat after the FAA decision. “We appreciate the FAA’s thorough review of this inquiry. Our test flight program is specifically designed to continually improve our processes and procedures. The updates to our airspace and real-time mission notification protocols will strengthen our preparations as we move closer to the commercial launch of our spaceflight experience,” said Virgin Galactic CEO Michael Colglazier.

SPCE stock forecast

The outlook for SPCE stock looks positive. Space travel is among the most promising investing themes for the next decade. The total addressable market is big and expanding. Virgin Galactic scores above competitors on multiple counts. First, the company got the first-mover advantage by making the first space flight ahead of Elon Musk's and Jeff Bezos’s space companies.

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Second, Branson is an airline industry veteran with considerable experience in running an airline company. Branson’s backing of Virgin Galactic could be another competitive advantage for the company. Virgin Galactic is targeting the premium segment of the space travel market, which will help it attract premium valuations.

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Virgin Galactic stock target price

Virgin Galactic has an average target price of $31.30, which is a premium of 38.7 percent over its Sept. 29 closing prices. The stock has four buys, five holds, and two sell ratings from the analysts surveyed by TipRanks.

Is SPCE stock expected to go up more?

Space travel is an emerging industry. Several triggers could take SPCE stock higher in the short to medium term. The triggers include updates on flight bookings and initiating flights. Over the long term, SPCE stock is a bet on the space travel industry.


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