Virgin Galactic Stock Has Solid Outlook After Branson’s Space Travel

Mohit Oberoi, CFA - Author

Jul. 12 2021, Published 11:20 a.m. ET

Virgin Galactic (SPCE) stock was trading lower in the early price action on July 12 despite the company’s successful space flight. What’s the 2025 forecast for Virgin Galactic and is it a good long-term investment?

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Sir Richard Branson has beaten Jeff Bezos to become the first billionaire to reach space. Bezos is slated to travel in space later this month courtesy his space exploration venture Blue Origin. Elon Musk also owns SpaceX, which is among his several privately held companies. He even started accepting Dogecoin as payment for space travel. However, Musk still hasn’t started to accept Dogecoin as payment for Tesla.

Virgin Galactic went public through a SPAC merger

Virgin Galactic went public through a reverse merger with Social Capital Hedosophia Holdings (IPOA) in 2019. The SPAC was sponsored by Chamath Palihapitiya who has since launched several of these blank-check companies. Meanwhile, Palihapitiya sold the SPCE stock that he was holding in a personal capacity.

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Many criticized him for cashing out of SPCE stock even though he clarified that he sold the stock for liquidity and to make way for a climate change investment. Palihapitiya selling off his stake in SPCE triggered a sell-off in his other SPACs too.

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SPCE stock forecast

Coming back to SPCE stock, it has a median target price of $38.50, which is a discount of over 12 percent from the current levels. The stock’s highest target price is $51, which is a premium of almost 15 percent over the next 12 months. SPCE’s street lowest target price of $20 is a discount of over 54 percent. The stock has three buys, six holds, and one sell rating.

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Analysts’ apathy towards Virgin Galactic stock isn't hard to comprehend. It's a pre-revenue company commanding a market capitalization of over $10 billion. To be sure, we have examples like Lucid Motor, which commands an even higher valuation despite not having started vehicle deliveries.

Also, competition is heating up in the space travel industry. The billionaire rivalry is already at play with Branson getting ahead of Bezos. Musk and Bezos aren't close friends either. Musk has been critical of Bezos and even called him a “copycat” in the past.

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Why is Virgin Galactic stock falling?

Virgin Galactic stock was higher in premarket on July 12 but turned lower in regular trading. The company has announced a $500 million stock issuance. Virgin Galactic took a leaf out of clinical-stage biotech companies that club positive trial results with a stock issuance to capitalize on the positive sentiments and the spike in their stocks. Many meme stocks have perfected the art of stock issuances.

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Virgin Galactic stock forecast 2025

Space travel is an emerging and nascent industry. Virgin Galactic estimates the industry's TAM (total addressable market) at $900 billion and plans to target the premium end, which it thinks is a $300 billion market. “So even if we were to capture a relatively small portion of that, we’re still talking about a huge TAM,” said its then CEO George Whitesides.

Virgin Galactic could start commercial operations as soon as 2022, which would help gauge the demand for its premium services. Overall, the space tourism industry has a positive long-term outlook, which bodes well for players like SPCE. Virgin Galactic has the first-mover advantage. If SPCE can execute the plans well, it could deliver handsome returns over the long term.


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