Please ensure Javascript is enabled for purposes of website accessibility

Why Virgin Galactic Stock Dropped 7% This Morning

By Rich Smith – Aug 17, 2020 at 2:41PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Today's Wall Street Journal seems to have spooked the momentum traders.

What happened

Shares of space tourism company Virgin Galactic (SPCE -2.01%) fell out of the sky this morning after getting their wings clipped by a column in The Wall Street Journal (WSJ) on Monday. Pointing out that the stock's share price "is up 66% to date," the newspaper warned that "maintaining the buzz will be a struggle" for a company that has yet to generate any appreciable revenue.

Investors seem unnerved by the Journal's warning, and Virgin Galactic stock fell more than 7% in early trading (though the stock has trimmed its decline to just 2.3% through 3:15 p.m. EDT).

Chart showing a declining red stock arrow on a white checked background.

Image source: Getty Images.

So what

This is music to short sellers' ears. As the Journal points out, investors betting against Virgin Galactic stock are "circling" and betting that Virgin's stream of "positive headlines" won't be able to keep its stock price up forever.

Already, Virgin has had to delay the start of commercial space tourism operations into at least the first quarter of 2021. The company's other business line, developing aircraft for hypersonic commercial air travel, "remains an ultra-long shot for which there isn't even a tentative time horizon," warns the newspaper. 

Now what

None of this is news to investors who have been following Virgin's story since the beginning. It does, however, appear to have unnerved traders who've glommed onto the stock as a momentum play. I wouldn't be surprised, though, after the shock of today's WSJ pronouncement passes, to see investors jump right back into Virgin Galactic stock after the selling stops.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Virgin Galactic Holdings, Inc. Stock Quote
Virgin Galactic Holdings, Inc.
$4.87 (-2.01%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.