What happened
Shares of Virgin Galactic Holdings (SPCE 3.50%) rocketed as much as 8.7% higher on Friday following some positive comments from Richard Branson and the strong reception its sister company received on its Wall Street debut.
So what
Virgin Galactic was one of the first special-purpose acquisition company (SPAC) stocks to hit orbit when it went public in late 2019, but the company's shares have been on mostly a downward trajectory of late. The space tourism company captured the imagination mid-year when it rocketed founder Branson into space, but a combination of technical glitches and delayed timelines has the shares down 73% over the past six months.
Image source: Virgin Galactic.
Friday was a rare up day. Virgin Orbit (VORB), a separate company that transports cargo and not tourists into space, and is also launched from Branson's Virgin Group, completed its own SPAC deal and saw its shares jump as much as 20% on their first day of trading. Branson was in New York to mark the debut, and during an appearance on CNBC, the billionaire acknowledged space stocks had been volatile but said he remains optimistic.
"When things are happening again and people are going into space, I suspect we'll see a movement in the stock price," Branson said.
One of Wall Street's bulls on the stock also chimed in. Truist Securities analyst Michael Ciarmoli lowered his price target on Virgin Galactic but maintained a buy rating. Ciarmoli's target price of $32 suggests plenty of upside from here.
Now what
Branson might be right that investor interest will bubble up again once things are happening. Alas, for Virgin Galactic that's still a ways off. Virgin Galactic postponed a planned fall flight; as of its last update, the company was not anticipating beginning actual tourist flights until late 2022. Meanwhile, competition is moving forward: Jeff Bezos's Blue Origin has now launched three successful tourist flights.
If all goes to plan, this could still be a winning investment. But since we don't yet know the size of the market for six-figure tickets into space, and whether Virgin Galactic can work out the kinks and reliably serve that market, there is good reason for investor caution surrounding Virgin Galactic right now.
