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Why Virgin Galactic Stock Rocketed on Tuesday

By Rich Smith – Nov 9, 2021 at 12:52PM

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The company looks set to start commercial space tourism flights in late 2022.

What happened

Shares of space tourism pioneer -- but recent space tourism laggard -- Virgin Galactic Holdings (SPCE 2.60%) caught an updraft on Tuesday after its fiscal third-quarter 2021 earnings report revealed the space company to be losing more money than analysts had expected, but collecting more revenue than they'd hoped.

Heading into Q3, Wall Street had forecast that Virgin Galactic would lose $0.28 per share in the quarter on sales of $1.6 million. Virgin whiffed on the earnings forecast, losing $0.32 per share, but it eked out a small revenue beat with sales of $2.6 million, sending its shares up 5.1% through noon EST.  

Rocket trail from Earth to sky ending in what looks like a star.

Image source: Getty Images.

So what

As Virgin Galactic reported, its $0.32-per-share loss for the quarter was less than the $0.41 per share it lost a year ago -- and its $2.6 million in revenue was way better than the zero dollars and zero cents collected in Q3 2020.  

And yet, good as that news was, it probably isn't the main reason why Virgin Galactic shares are flying higher today. Rather, Virgin is benefiting from color commentary on the numbers, and specifically, from CEO Michael Colglazier's observations that: "demand for space travel is strong, and we've been selling seats ahead of the pace we had planned," even at the company's new and improved $450,000-per-ticket price point.

According to Virgin, it now has 700 reservations filled for future flights. That number is up from 600 previously, which implies that the company has managed to sell 100 seats at the higher price.

Now what

Now, management didn't say that outright, but it did imply it, asserting that "current pricing of $450,000 per seat has been well received." And if you assume that the company stuck to its planned price hike before letting go of those last 100 tickets, the logical implication is that the price hike stuck, and Virgin Galactic stands to record a cool $45 million from the incremental sales because of it.

At least, it will record that revenue once it starts flying. In that regard, management confirmed that it is "on track" to begin commercial space tourism flights in the fourth quarter of 2022 -- and it seems that's exactly what investors wanted to hear.

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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