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Why Virgin Galactic Stock Soared Today

By Joe Tenebruso – Aug 31, 2021 at 5:37PM

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The space-travel industry could approach $120 billion according to one analyst.

What happened

Shares of Virgin Galactic Holdings (SPCE -1.15%) surged 9% on Tuesday following bullish analyst commentary. 

So what

Jefferies analyst Greg Konrad placed a buy rating and a $33 price forecast on the space tourism pioneer's stock. If he's correct, investors could enjoy gains of roughly 22% from the stock's current price near $27.

Earth from space.

A surprisingly high number of people say they're willing to pay hefty sums to travel to space. Image source: Getty Images.

Konrad conducted a survey of 233 millionaires that showed 37% want to travel to space, with 29% willing to spend over 5% of their wealth to do so. Konrad thus believes that the space-travel industry could grow to nearly $120 billion, with as many as 250,000 people -- 10% of the approximately 2.5 million people with over $10 million in net worth -- spending $450,000 per flight. 

To meet this demand, Virgin Galactic, according to Konrad, needs to build the capacity to support 660 flights per year by 2030. In turn, he estimates that the space-travel company could produce revenue and operating profits of $1.7 billion and $680 million, respectively, by that time. 

Now what 

Virgin Galactic made history in July when it successfully completed its first fully crewed space flight. The news appears to have sparked a desire in many people to experience the wonders of space, particularly among those who can afford the steep price tag of a flight. Thus, Virgin Galactic's market opportunity could be much larger than many investors previously expected.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Jefferies Financial Group Inc. The Motley Fool has a disclosure policy.

Stocks Mentioned

Virgin Galactic Stock Quote
Virgin Galactic
$5.14 (-1.15%) $0.06
Jefferies Financial Group Stock Quote
Jefferies Financial Group
$37.73 (-0.76%) $0.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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