What happened

It's official. Virgin Galactic (NYSE:SPCE) has competition in the space tourism space.

At 9:12 a.m. EDT on Tuesday, rival space tourism provider Blue Origin launched its New Shepard suborbital spacecraft on its first crewed mission.

Seven minutes later, the spacecraft's booster landed back on Earth, cushioned by its retrorockets.

Three minutes after that, its crew members (i.e., space tourists, as the flight was piloted remotely) -- Amazon founder Jeff Bezos; his brother, Mark Bezos; onetime "Mercury 13" astronaut hopeful Wally Funk; and teen hedge fund scion Oliver Daemen -- joined the booster on the ground, floating safe and sound to Earth under a trio of parachutes.

And now, about two hours after that -- 11 a.m. EDT -- Virgin Galactic stock is down 8%.

Blue Origin space capsule.

Image source: Blue Origin.

So what

What's the connection among all these events? Simply this: Nine days ago, Virgin Galactic pioneered the business of space tourism by flying the first FAA-authorized "full commercial launch" to the edge of space.

Virgin Galactic is targeting a big market for space tourism -- 1.5 million "decamillionaires" (people with a net worth of 10 million of certain currencies) in the U.S. alone, who might want to lay out $250,000 for a space ticket; 6 million-odd mere millionaire Americans, for whom such a ticket would be a stretch, but not an unreachable one; and perhaps 20 million total millionaires all around the world. But big as that market is, now it's been cut in half as Virgin Galactic will have to compete with Blue Origin for a slice of it.

Now what

Now does this justify Virgin Galactic stock taking an 8% haircut today?

Perhaps not. Even 10 million customers, divided by the six passengers-at-a-time that Virgin Galactic can carry on its VSS Unity spaceplane means that Virgin Galactic has a lot of potential business ahead, and a lot of flights ahead of it before it exhausts consumer demand.

That being said, investors need to be aware that even after New Shepard's touchdown, the second shoe has yet to drop. In just a year or three, we could see SpaceX enter the space tourism race with its new Starship spacecraft -- a spaceship capable of truly reaching, and remaining in, and traveling through space; of carrying 100 tourists at a time; and of doing all this at prices that neither Blue Origin nor Virgin Galactic has any hope of matching.

That's the real danger to Virgin Galactic stock. If you're selling today, that's the reason you should be selling.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.