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Why Virgin Galactic Stock Dropped 6% This Morning

By Rich Smith – Jul 14, 2020 at 12:05PM

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It's a wobble, nothing more.

What happened

Shares of space tourism pioneer Virgin Galactic (SPCE 7.60%) declined nearly 6% in early trading Tuesday before recovering to only about a 2.5% loss as of 11:30 a.m. EDT -- but if you're a long-term investor in the stock, I don't think there's a whole lot to worry about here.

So what

Why not? Well, for one thing, there's no news behind today's stock decline. Sure, there was also no real news behind yesterday's rally in Virgin Galactic stock, which was in fact up 6% at one point on the back of an analyst's buy rating. Also true, that rally soon faded, and Virgin Galactic shares ended up joining the Nasdaq in the red, down 6% on the day.

SpaceShipTwo rocketing towards space.

Image source: Virgin Galactic.

But honestly, I think today's decline in the stock is just a continuation of the retracing we saw begin mid-afternoon yesterday. Worries that California, and other states, are beginning to roll back their reopenings torpedoed stocks on the tech-heavy Nasdaq yesterday, and those same worries continue to weigh on the Naz (currently the only major index still in the red) today.

Now what

Although Virgin Galactic itself trades on the NYSE, the stock trades a lot more like a tech stock -- skyrocketing when investors are optimistic about hopes for future growth, and plummeting whenever growth seems uncertain. That's the kind of trading scheme that lends itself to wobbles in stock price. Over the long term, however, Virgin Galactic's value won't be determined by such wobbles, but by its progress toward getting its spacecraft certified to carry commercial passengers, and the date of its first commercial flight.

We should learn more about those items in just a few weeks. Virgin Galactic reports earnings on Aug. 3.  

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

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