What happened

Wall Street continues to digest the quarterly update provided by Virgin Galactic Holdings (SPCE -2.76%), and investors continue to be unimpressed. Shares of Virgin Galactic traded down 6% on Wednesday morning, and are now off 14% for the week.

So what

Expectations were low heading into earnings, but Virgin Galactic still managed to underwhelm. The space tourism company reported a loss of $0.55 per share on zero revenue, considerably worse than the estimate of $0.27 per share loss.

More disturbingly, the company was not able to provide a clear timetable on when flight testing will resume. Virgin Galactic had originally hoped to start flying tourists into space last year, but a combination of pandemic-related complication and testing setbacks has pushed that date back.

The Virgin Galactic Unity spacecraft with its tether ship.

Image source: Virgin Galactic.

Virgin Galactic has said previously it hopes to resume testing this month toward a goal of beginning service before year's end. But the company on its earnings call said it has discovered fatigue and stress issues on the massive aircraft used to get its spacecraft airborne. Engineers are still assessing the damage, and Virgin Galactic hopes to provide an updated testing schedule next week.

Analysts are lowering expectations as a result. On Tuesday evening Cowen's Oliver Chen lowered his price target to $23 from $40 while keeping his outperform rating on the stock. Chen wrote that he still likes Virgin Galactic's "superior brand equity and unique experiential approach to space," but the testing needs to resume for the stock to gain momentum.

Chen joins analysts at Credit Suisse and Susquehanna in lowering the target price for the stock.

Now what

We've said before that space is hard, and setbacks and delays are to be expected. Hopefully, the company can work through this trial-and-error phase quickly and begin service by early 2022, and Virgin Galactic can prove itself to be the high-flying growth stock that bulls have hoped it will be.

That's still possible, but investors also need to grapple with the risks that Virgin Galactic will need a lot of time to work out the kinks. That opens up new risks, especially since competition is coming in the form of Jeff Bezos' Blue Origin. Virgin Galactic shares are now down 70% from their February high, but this is still a pre-revenue company valued by the market at more than $4 billion. Given the risks and the valuation, it is understandable that investors are cautious about Virgin Galactic right now.