Please ensure Javascript is enabled for purposes of website accessibility

Why Virgin Galactic Stock Dropped Today

By Rich Smith - Jan 15, 2021 at 11:33AM

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

Blue Origin could potentially beat Virgin Galactic to space (tourism).

What happened

Virgin Galactic (SPCE -5.20%) shares, which spiked higher yesterday along with most other space stocks, are retreating today -- down 6.2% in 10:15 a.m. EST trading. Partly, I suspect this is simple profit taking by traders cashing in their windfall profits of yesterday.

But there's another reason for Virgin Galactic stock to be falling, too.

Blue Origin New Shepard crew capsule descends to Earth under parachutes.

Blue Origin New Shepard crew capsule descends to Earth under parachutes after successful test flight Jan. 14, 2021. Image source: Blue Origin.

So what

Virgin Galactic wants to become a space tourism company, you see, but it still has a ways to go before it can call itself that -- at least a couple more test flights with no one but crew aboard, then a test flight carrying company founder Sir Richard Branson to space and back, and then, finally, the ribbon cutting -- the beginning of commercial spaceflight operations for paying customers.

Factor in the time required to recover from a failed launch attempt in December, however, then finish the scheduled preliminary flights, and commercial operations probably can't begin before the end of Q1 this year -- maybe not even Q2. And here's the problem:

Yesterday, Jeff Bezos' Blue Origin space company conducted its fourteenth test flight of its New Shepard suborbital space tourism rocket. For the first time ever, the rocket carried a new capsule atop it, equipped with six seats and a test mannequin in what Blue described as its "stable configuration" (meaning there probably won't be any more upgrades needed before commercial operations begin). And in a surprising revelation, CNBC reported that this flight was one of two final test flights before New Shepard begins carrying people aboard.    

Now what

Reporting to its followers on Twitter, Blue Origin described Thursday's test flight as "wholly successful." Now, reports CNBC, we have only to wait for a second test flight to go off six weeks from now, then wait six weeks after that to see "the first crewed flight" of New Shepard.

Will this be an actual commercial flight? I rather doubt it, as Blue Origin hasn't begun selling tickets yet, or even announced a ticket price. Most likely this will be a crewed test flight carrying only Blue Origin employees. But it does suggest that by April, Blue Origin will already have caught up to where Virgin Galactic is today and be on the cusp of starting its own commercial operations carrying Blue Origin tourists to space.

In short: Even if Virgin Galactic's lead hasn't disappeared entirely, it's certainly shrunk appreciably -- and that's why the stock is down today.

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.
$6.20 (-5.20%) $0.34

*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 service.

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 05/17/2022.

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.