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Why Virgin Galactic Stock Just Popped 8%

By Rich Smith – Aug 2, 2021 at 5:01PM

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Deutsche Bank sounds optimistic about space today.

What happened

Shares of Virgin Galactic (NYSE: SPCE), Sir Richard Branson's start-up space tourism company, closed up 6.3% on Monday. In the absence of any other news of note, you can probably thank Deutsche Bank for that one.

As CNBC reported late this morning, Deutsche Bank is out with a new report on the space market.  

Arrow angles up on a green stock chart.

Image source: Getty Images.

So what

The headline in said report says that global space-launch services is an $8 billion-a-year industry today and could grow to $38 billion a year in less than a decade.

Launch services, says the bank, will be "supply constrained for the rest of the decade as demand from corporates and governments increases." Depending on how you look at it, the greatest growth will occur in either (a) the market for putting small satellites (under 1.5 tons) in orbit, with this market growing 10 times in under 10 years, or (b) the market for launching "super heavy" payloads in excess of 30 tons.

That latter market barely even exists today, with only SpaceX's Falcon Heavy capable of lifting payloads in excess of 30 tons. Deutsche, however, sees it turning into a $13.3 billion-a-year market by 2030.

Now what

The big question here is -- even assuming Deutsche Bank is right about all of the above -- what relevance does any of the above have for Virgin Galactic stock? And why would Deutsche's report cause a space tourism company like Virgin Galactic to "go up?"

Virgin Galactic doesn't carry payloads to orbit at all. It carries six to eight humans at a time -- massing perhaps 1.5 tons in total -- but only to suborbital altitudes and back again.

And the answer to that question is that Deutsche Bank's report probably is not directly relevant to Virgin Galactic stock. (It may be more relevant to Virgin Galactic's sister company, Virgin Orbit, which is said to be weighing a special purpose acquisition company (SPAC) IPO. Regardless, I'd say the report is at least tangentially relevant to Virgin Galactic's business as it indicates a growing market for space services, in general.

As one of the very first space companies to trade publicly, Virgin Galactic is in the right place at the right time to benefit from that.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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