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Why Virgin Galactic Stock Dropped Today

By Rich Smith - Jun 15, 2021 at 4:42PM

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And did it deserve to?

What happened

Shares of Virgin Galactic (SPCE -1.48%) retraced 4.4% Tuesday -- after rising 5% on Monday in response to the astounding success of rival Blue Origin's auction of its very first space tourism ticket.

Gaining 5% and then losing 4.4% may not sound so bad. It sounds like it should still yield a net gain. But in fact, adding 5% to a smaller number, then subtracting 4.4% from a larger number, means that ultimately ... Virgin Galactic stock ended up lower today ($34.89 a share) than it was before spiking on the Blue Origin news ($35.10)!

Rendering of a Virgin Galactic SpaceShip2 rocketing into space.

Image source: Getty Images.

So what

There are two things you should know, though. First: There was no good reason for Virgin Galactic stock declining today -- no analyst downgrades, no negative earnings news, no news at all, in fact.

And second: There's actually better reason for Virgin Galactic stock to be going up instead of down.

Consider that Blue Origin's magic ticket ended up selling for $28 million on Saturday. Granted, it's highly unlikely that Blue will be able to sell very many tickets at that price. More likely, regular commercial space tourism flight tickets will be priced considerably lower -- but the $28 million price tag on that first ticket is highly suggestive that demand for space tourism, and willingness to pay high prices for the service, may be greater than we thought.

Now what

And here's even another reason to be optimistic: In a note to potential customers that was reviewed by The Washington Post last week, Virgin Galactic stated that it expects to wrap up its test flight program on the VSS Unity spaceplane "by late summer or early fall."

Assuming this is the case, it will leave perhaps as many as four months before the end of 2021 -- time in which Virgin could conceivably begin commercial space tourism operations this year, rather than waiting to fly commercially until 2022, as experts have suggested was more likely.

The sooner Virgin Galactic starts flying commercially, of course, the sooner it can begin selling tickets and collecting revenue. That's good news for Virgin Galactic -- and good reason for the stock to be going up today, not down.

Rich Smith 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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