What happened
In just five days, Virgin Galactic Holdings (SPCE -5.47%) -- the most famous of the recent run of space SPAC IPOs -- says it will send its founder, Sir Richard Branson, into space.
As the July 11 target date for that flight draws closer, investors remain excited, and Virgin Galactic shares tacked on nearly 10% in early trading today.
Image source: Getty Images.
So what
Then, Swiss investment bank UBS (UBS -3.63%) replied with the equivalent of a yawn, and Virgin Galactic stock promptly gave up most of those gains.
In a note out this morning, UBS cited Virgin Galactic's skyrocketing valuation (up 50% in June alone) as we approach the launch as its reason for downgrading Virgin Galactic stock from buy to just neutral.
Although the analyst increased its price target to $45 to accommodate the run-up, the fact that Virgin Galactic already costs more than that meant the bank could no longer recommend buying the stock. As a result, as of 12:40 p.m. EDT today, Virgin Galactic's gain has retreated to just 2%.
Now what
Will the stock recover? UBS says the upcoming catalysts that could drive investor interest in Virgin Galactic stock holds the potential to support the current price. However, the bank believes there's already a lot of good news priced into the stock, according to TheFly.com.
Ultimately, what matters isn't so much whether Virgin Galactic launches as planned on July 11 -- or who is sitting inside the spaceplane when it launches -- but whether this company can earn a profit from launching more and more people, more and more frequently, in the months, quarters, and years to come.
In the meantime, what we have here, folks, is still an $11 billion company with no history of revenue, much less profits. Virgin Galactic has the potential to become a winning stock, but it still needs to prove that it can live up to the valuation that investors have assigned to it.
