What happened

Shares of Virgin Galactic Holdings (SPCE -1.52%) dropped more than 10% at the open after the space tourism company reported weaker-than-expected results and warned of potential further delays to its testing schedule.

So what

Investors knew going into earnings season that Virgin Galactic was bound to report a loss, but the company's first-quarter results came in worse than expected. Virgin Galactic lost $0.55 per share in the quarter on zero revenue, missing analyst expectations for a $0.27-per-share loss on revenue of $330,000.

Overhead view of the Unity capsule being carried into the atmosphere.

Virgin Galactic's United spacecraft with its transport plane. Image source: Virgin Galactic.

The company had originally hoped to be flying tourists into space by now, but a combination of pandemic-related complications and testing setbacks has pushed the target date to later this year at the earliest. It could easily fall into 2022, as Virgin Galactic warned it is evaluating the timing of its next test flight. The company had previously hoped to conduct that test this month.

Virgin Galactic said it discovered fatigue and stress on the massive aircraft used to get its spacecraft airborne. During the post-earnings call, Mike Moses, president of space missions and safety, said the company hopes to update the test schedule next week.

Now what

The good news is Virgin Galactic's quarterly net loss of $130 million was an improvement over the $337 million net loss in the first quarter of 2020. The company still has more than $600 million in cash to help guide it through the testing phase.

But the fundamental question of whether or not Virgin Galactic's plan to get tourists into space will work is still unanswered, and competition is coming. Jeff Bezos' Blue Origin earlier this month opened up ticket sales for its rival service.

Virgin Galactic shares have lost nearly 70% of their value over the past three months, but the company is still valued by the market at more than $4 billion. If Virgin Galactic can get airborne and iron out the kinks this could still end up being the high-flying growth stock that bulls have hoped it will be, but given the uncertainty and the risks this stock is best left as a small part of a well-diversified portfolio.