What happened
Shares of Virgin Galactic Holdings (SPCE -12.17%) dropped 9.9% this week, according to data from S&P Global Market Intelligence. The company had no news released this week that would have caused the drop, so it looks like the stock got caught up in the recent sell-off in high-growth stocks.
So what
Virgin Galactic is an aerospace company building rockets to take humans to space, either for recreational or research purposes, with the hopes of revolutionizing how we travel across the globe. The company went public through a special purpose acquisition company (SPAC) back in 2019 and has since traded wildly, falling in and out of favor and becoming a popular meme stock along the way. In February, shares of Virgin Galactic Holdings were up almost 150% this year, however, that buzz for the company has fallen, with the stock down 36% year to date.
Image source: Getty Images.
The problem comes with Virgin Galactic's "earnings." I put earnings in quotations because Virgin Galactic doesn't have much of a business right now. It plans to start commercial flights in the fourth quarter of 2022, around a year from now, but until then the company is going to have negligible revenue and continue hemorrhaging money as it builds up its spaceflight capabilities. Without any profits for investors to reference, you should expect the stock to trade with a lot of volatility in upcoming quarters, as it has in the past.
Now what
Virgin Galactic management touts the 700 reservations it has for the spaceflight service it is planning that will cost $450,000 per ticket. This is a good base for when it eventually starts commercial service. Any investors in the company should look for reservations to rise and for updates on when commercial flights will actually start. If that never happens or gets delayed, it will be tough for Virgin Galactic to build a viable business model.
