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Why Virgin Galactic Stock Just Dropped 21%

By Rich Smith – Feb 27, 2020 at 11:48AM

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Earnings? Partially. But maybe also not just earnings.

What happened

Shares of Virgin Galactic (SPCE 3.27%) stock are down 20.8% as of 11:30 a.m. EST Thursday, and there's an obvious reason for that -- a couple of obvious reasons, actually, and I fear they may be playing off of one another:

Earnings...and also coronavirus.

Collage of an airplane, coronaviruses, and a world map

Image source: Getty Images.

So what

Now how are these two stories related? Yesterday, as you may recall, Virgin Galactic stock dropped 15.5% after the company informed investors that it lost $211 million on sales of less than $4 million last year. Not good. That right there could explain any sell-off in the stock.

But consider, too, what business Virgin Galactic is aiming to build here: It's an entertainment business. It's a tourism business. It's a business...that sticks folks together in a hollow tube for hours, and flies them around through the air.

Now what

And in case you haven't noticed, a lot of folks are kind of nervous about being stuck in close proximity to a bunch of strangers right now, especially if one of those strangers happens to sneeze!

This being the case, I'd expect a stock like Virgin Galactic to be especially susceptible to coronavirus concerns, even if it were making money (which it isn't), and even if it were, you know, already carrying passengers regularly (which it also isn't).

Add it up, and you've got yourself a double whammy for Virgin Galactic stock, and that's why it's down so much today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of Virgin Galactic Holdings Inc. The Motley Fool has a disclosure policy.

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Virgin Galactic Holdings, Inc. Stock Quote
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