Virgin Galactic Holdings' (SPCE -11.74%) dramatic fall from orbit in recent months picked up speed on Thursday, with the stock falling as much as 17% after the space tourism start-up announced plans to raise $500 million in new debt financing.
The stock is now down about 75% in just six months, and might be tempting for some bargain hunters. But investors should be cautious when considering Virgin Galactic shares even at these depressed levels.
Image source: Virgin Galactic.
Virgin rocketed higher in the first half of 2021 on excitement about the company's maiden tourist launch, which sent founder Richard Branson into orbit. But it has been mostly bad news coming from the company in the months since, and after a series of delays Virgin Galactic now does not expect to start regularly scheduled flights until the end of 2022 at the earliest.
Even after the declines, Virgin Galactic is valued by the market at more than $2.5 billion. Given the risks that come with space tourism, and the added twist that others, including Jeff Bezos' Blue Origin, have gotten a jump on Virgin Galactic by launching multiple successful flights, this is still a highly speculative stock.
Should Virgin Galactic work out the kinks and eventually launch scheduled service, its long list of reservation holders is a powerful asset and could help lift Virgin Galactic shares and turn it back into the growth stock investors had once hoped it would be. But even in the best-case scenario there are still a number of quarters up ahead with little revenue, plenty of uncertainty, and very few catalysts that would provide reason for investors to rush in.
Space tourism is exciting, and it is understandable if investors still have high hopes for Virgin Galactic. But even so, there is no reason to rush in to buy today after its most recent decline.
