Virgin Galactic Holdings (NYSE:SPCE) is delaying a test flight due to new government-imposed COVID-19 restrictions. Investors have been counting on the company completing the tests this year and staying on track to begin revenue-generating flights in 2021, so the stock fell almost 10% on Monday morning as a result of the delay.
Virgin Galactic isn't generating much revenue right now, and the company's goal of beginning to fly tourists into space in 2020 was thwarted by the pandemic. Investors now hope service will begin next year, but that can't happen until after some additional test flights are performed.
The company on Monday said that the next test flight, which had been scheduled for later this month, is on hold indefinitely due to new COVID-19 restrictions. The government of New Mexico, where its Spaceport is located, announced a two-week lockdown as part of its efforts to stem that state's rapidly spreading coronavirus outbreak, and that means Virgin Galactic will be minimizing its operational footprint.
"While these new restrictions cause us to adjust our flight schedule, we take this pause in stride and will be prepared to resume our pre-flight procedures and announce a new test flight window as soon as we can," CEO Michael Colglazier said in a statement.
The delay is a blow both to Virgin Galactic's hope to start passenger service next year, and the company's chance to generate revenue in the quarter. The test flight was to include payloads as part of the NASA Flight Opportunities program.
Virgin Galactic is a high-risk, high-reward sort of endeavor, and investors who buy its shares should expect the company to hit speed bumps. It has more than $700 million in cash and equivalents on the books to fund operations while it awaits revenue, and the bull case for this turning into a growth stock isn't deflated by this delay.
That said, it is a reminder that a lot will have to go right in order for this company to grow into what investors hope it will become. Virgin Galactic's stock, like its space tourism offering, is best left for thrill-seekers who can handle the ups and downs that go with the ride.