Virgin Galactic (SPCE -5.12%) highlighted the positives when it reported first-quarter 2024 earnings. That's exactly what you'd expect, of course, as there were notable successes to discuss. However, there's still plenty of bad news to consider before you buy the stock. Here's what you need to know.
Virgin Galactic showed some promise
Virgin Galactic's first-quarter 2024 results included some important positives. For example, revenue of around $2 million rose materially from the $400,000 or so it earned in the first quarter of 2023. That's largely because the company is now flying into space on a regular basis, with 2023 being the year that it effectively proved it could achieve that goal. That it is still flying into space with paying customers is a sign that there's long-term potential in the business model.
Image source: Getty Images.
In addition, Virgin Galactic was able to reduce operating expenses from $164 million in the first quarter of 2023 to $113 million in the same stanza of 2024. This is important because, after proving it was able to fly into space, the company announced that it was time to start reducing its spending. While that required reducing flight frequency, the company has essentially lived up to a key promise. That's a good sign.
And finally, on the bottom line, Virgin Galactic lost $87 million in the first quarter of 2024 versus $140 million in the same quarter of 2023. While losing money is far from ideal, the company is still building out its business, so red ink isn't shocking. However, reducing the loss suggests that management is trying to balance its growth plans with its spending needs and revenue-generating ability.
All in, it was a decent quarter. But that doesn't mean investors should run out and buy Virgin Galactic stock. In fact, only the most aggressive investors should even be considering it.
Virgin Galactic isn't ready for prime time
The problem is that, despite a solid first-quarter 2024 performance, Virgin Galactic is still a long way from reaching the finish line. Its big goal right now is to build a second-generation spacecraft that management believes will help the company create a sustainable long-term business. But that craft won't be ready to fly until the start of 2026, at the earliest.
In the meantime, Virgin Galactic is going to continue to burn through cash. That is very clearly evident when you look at the company's balance sheet. The company's cash balance fell from roughly $217 million at the end of 2023 to $195 million at the end of the first quarter. Its short-term investments dropped from $657 million to $570 million. And its long-term investments declined from about $72 million to $67 million. That's not shocking news, given the spending to build a new spacecraft, but it isn't good news, either.
And then there was the odd decision to raise $7.3 million via the sale of 5.1 million shares of stock. As the chart above shows, the stock's price has plunged, and most companies in this situation would want to avoid selling at such depressed prices. To be fair, the sale could be related to other issues like stock grants being made to employees. But the fact remains that selling stock today at such low prices is diluting shareholders. That's not a great thing, even if it helps the company reach the point where its business is self-sustaining.
Only appropriate for aggressive investors
All in, Virgin Galactic appears to be making solid progress on the plans it has laid out. That's good, but it isn't enough to make the stock worth buying for most investors. There's still a very long path to trod before the company's next-generation spacecraft is ready for action, and it has been very clear that getting to that goal is the linchpin for the company's long-term aspirations. Only aggressive investors will want to jump onboard before Virgin Galactic has even tested that all-important spacecraft.
