Please ensure Javascript is enabled for purposes of website accessibility

Why Virgin Galactic Stock Dropped Today

By Rich Smith – Oct 1, 2021 at 5:16PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

What went up just came back down.

What happened

After spiking more than 12% Thursday on news that the Federal Aviation Administration (FAA) has cleared it to resume flying, space tourism company Virgin Galactic (SPCE 3.15%) gave back about half of its gains Friday, closing down 5.8%.  

And that makes a lot of sense.

Green up arrow button and red down arrow button,

Image source: Getty Images.

So what

After all, few people thought (I expect) that the FAA was going to put Virgin Galactic out of business because, on a single flight to space, it veered out of its approved flight trajectory for a couple of minutes' time. The agency's decision to clear Virgin Galactic to resume test flights, and eventually carry passengers to space, therefore, wasn't exactly a surprise, and the stock probably didn't deserve a 12% bump in market capitalization because of it.

It also makes sense that investors who received a windfall profit from yesterday's share price run-up would want to sell and lock in those gains quickly because the future for Virgin Galactic still contains quite a lot of unknowns.

Now what

Specifically, we know that Unity 23 -- the company's next scheduled flight -- is now back "on," but we don't know exactly when it will go off. (Unity 23 was supposed to fly in late-September, but that date has already passed Virgin Galactic by).

We know that Virgin Galactic is supposed to fly a Unity 24 test flight sometime in mid-2022 as well, but we don't know precisely when that will happen, either. Nor do we know when commercial space tourism operations will be able to begin (i.e., Unity 25, 26, etc.) after that final test flight is complete.

Finally, we don't know whether Virgin Galactic will be successful in pushing through a near-doubling in the price of its space tourism tickets, or how much money it will continue losing, as it flies customers who have already bought tickets for $250,000 or less, before the price increase comes into effect.

Long story short, there's a lot of uncertainty surrounding Virgin Galactic still, and until the company begins flying regularly, recording material levels of revenue, and (dare we hope?) reporting profits, investors should expect to see continued turbulence in this stock.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Virgin Galactic Holdings Inc Stock Quote
Virgin Galactic Holdings Inc
SPCE
$4.91 (3.15%) $0.15

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
351%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.