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Why Virgin Galactic Stock Is Soaring Higher Today

By Lou Whiteman - May 24, 2021 at 9:17AM

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A successful weekend test flight gave bulls reason to cheer.

What happened

Shares of Virgin Galactic Holdings (SPCE -1.48%) rocketed 20% higher on Monday following a successful test launch over the weekend. It's a step in the right direction for Virgin Galactic, and investors are responding with cheers.

So what

It has been a rough few months for Virgin Galactic holders. The stock is off nearly 60% from its mid-February high on concerns about the company's ability to complete its testing schedule.

Virgin Galactic had originally hoped to launch its space tourism business last year, but delays due to pandemic-related issues and technical concerns foiled that timeline. Earlier this month it warned it was evaluating a new issue that it said could further delay testing, but late last week said things were a go for the weekend.

Virgin Galactic Unity rockets into space.

Image source: Virgin Galactic.

The test went off as scheduled on Saturday, with the VSS Unity achieving a speed of Mach 3 after being released from its mother ship and reaching space at an altitude of 55.45 miles before gliding back to Earth. It also carried revenue-generating scientific research, ensuring that Virgin Galactic will not post zero revenue in the current quarter.

In a statement, CEO Michael Colglazier called the test "a major step forward for both Virgin Galactic and human spaceflight," and said the company would now work to analyze the data generated from the test.

"We will immediately begin processing the data gained from this successful test flight, and we look forward to sharing news on our next planned milestone," Colglazier said.

Now what

This is but one small step in a long process, but it is an important step. And for investors who just weeks ago had reason to worry about when a next test might happen, the announcement is a big relief.

Virgin Galactic still has a lot to prove, both in terms of its technical ability to launch tourists into space and then actual demand for the service at a profitable price point once it does, but the bull case for this becoming a high-growth stock is back in focus thanks to the flight. Investors should still tread carefully here, and make stocks like Virgin Galactic a small part of a well-diversified portfolio, but Virgin Galactic did what it needed to do over the weekend.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Virgin Galactic Holdings Inc. The Motley Fool has a disclosure policy.

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