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Why Virgin Galactic Stock Is Closing This Week Strong

By Rich Smith - May 28, 2021 at 10:38AM

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Virgin Galactic lost half its value after February's flight delay. But now it's not delayed anymore.

What happened

Shares of space tourism pioneer Virgin Galactic (SPCE 2.06%) are looking to close the week on a high note Friday -- up 8.3% already at 10 a.m. EDT, after spiking more than 15% yesterday.

The apparent catalyst? Company founder Sir Richard Branson posted an inspirational (and promotional) video on Twitter yesterday afternoon, showing scenes from last Saturday's VSS Unity flight and making bold promises about the future.

Virgin Galactic VSS Unity in space.

VSS Unity took a selfie in space. Image source: Virgin Galactic.

So what

Over the course of the two-and-a-half-minute clip, Branson argues that space travel that once was considered "science fiction" is now a reality, and predicts that "hundreds of thousands of people" will fly to space and back on Virgin Galactic spaceplanes "by the end of this century."

Virgin Galactic investors seem to be responding to Branson's optimism and are buying back Virgin Galactic stock after its big slump.

Now what

Does such enthusiasm, all in response to a promotional video, make sense? In at least one sense, it might.

Consider that from Feb. 25, the day before Virgin Galactic dropped the bombshell about delaying flight tests until May, through Friday last week -- the day before it finally returned to space -- Virgin Galactic stock declined by literally 50%. But given that VSS Unity is now proven to be flying well again, all that has really changed about Virgin Galactic's business is that it's lost three months' time progressing toward its goal of launching commercial operations, and three months of future revenue from those operations.

But does a single quarter's delay really justify a 50% haircut to Virgin Galactic's stock price? Investors seem to think it does not, and that's why they're bidding the stock steadily back toward where it traded three months ago.

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

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