After getting only a 2.5% bump Monday on the back of a positive analyst note from Cowen & Co., shares of space tourism pioneer Virgin Galactic Holdings (NYSE:SPCE) are now entering into their second straight day of declines. On Tuesday, Virgin gave up all the modest gains it had earned in Monday trading (and even a bit more). Today, the stock shed 6% more in early trading, before recovering somewhat in the afternoon.
As of 1:55 p.m. EDT on Wednesday, Virgin Galactic shares were down about 2.5%.
But why is Virgin Galactic down at all? The upshot of Cowen's report Monday was uniformly positive.
Initiating coverage with an outperform rating (i.e., a buy) and a $22 price target, Cowen laid out a case for how it saw Virgin growing from essentially no sales today, to $1 billion in annual revenue 10 years from now -- to as much as $200 billion in annual sales through 2050 if it should succeed in building a hypersonic air-travel business on top of its space tourism.
That sounds like good news. The fact that investors aren't taking it as such (or at least, not getting as excited about the news as Cowen perhaps anticipated) may have more to do with the long timeline laid out by the analyst (10 years to significant revenue, 30 years to mega-revenue) than with the revenue estimates themselves.
For the time being, for Virgin Galactic to get its share price moving higher, perhaps the company should focus on just getting that first paying customer into space successfully, and back down to Earth safely.
We can all worry about how fast Virgin's business will grow in the 10 to 30 years subsequently, after it proves its business model is viable in the first place.