As a business, there are still many questions about Virgin Galactic's (SPCE 3.54%) overall viability. In this clip from "The Rank" on Motley Fool Live, recorded on March 28, Fool.com contributors Travis Hoium and Jamie Louko outline how the aerospace company could be worth very little or tens of billions of dollars in 10 years, but it's too early to tell.
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Travis Hoium: Virgin Galactic is absolutely a boom-or-bust stock. I will 100% admit that upfront. Basically no revenue to date, but the interesting thing about them is we are getting to the point where space tourism and eventually things like travel through space, so they're designing a Mach 3 jet that could potentially eventually take you from LA to Tokyo in a couple of hours. There's a lot of opportunity there if they can get basically the product and the engineering right.
They've had a lot of delays when they became public through a SPAC in I think it was 2020. They had a lot of projections about when they're going to be generating revenue, which would've been last year. They definitely didn't hit any of those and they've hit a few hurdles. But I think they're improving their product from an engineering standpoint and that's the lens that I look at this with is, do I want to take a chance on safety in launching something into space, or do I want to have a six-month delay?
I'll take the six-month delay every time in that case. So that's some of the decisions that they've made, or at least that's what they are saying to the public. The other thing that I think is interesting is they've actually increased their prices. They're now charging $400,000 dollars or more for tickets for their trip to space, which is about an hour long. That is about $250,000 higher than they were advertising previously. Here's a company that apparently has enough demand to increase prices.
Now, they need to actually get their product out there and commercialized but if they do, that will get us to the point where they're going to be able to generate cash flow much quicker than they had previously anticipated. If we get to the point where in 10 years from now, something like taking a trip into space, into weightlessness for a couple of hours is something you would do on a really high-end bachelor party, that's a crazy change in mindset to me and I think we're headed there.
I don't know if Virgin Galactic is going to do it, but there's only a handful of companies that are even in this game. I would much rather sit in a Virgin Galactic spacecraft versus something like the Blue Origin, which is vertical takeoff versus the horizontal takeoff and landing the way Virgin Galactic does it.
Boom or bust, but if we get to the point where in 10 years spending a $100 or $200,000 dollars to take a quick trip into space is something that's possible and that isn't breaking news on the evening news, I think that's going to be a massive investment opportunity. So I don't know where it's headed, but it's worth the risk to me right now.
Jamie Louko: I think space is a very interesting opportunity, but I think the space is so early that determining who's going to win now when companies aren't even making money yet, for me at least is an extremely difficult thing to do. While I agree, that Virgin Galactic definitely has some competitive advantages over the next five years or 10 years until this actually becomes somewhat of a scalable business, there is so much that could happen in between those times. Jeff Bezos could just make Blue Origin his new baby and invest billions and billions of dollars into that.
Hoium: Well he's already done that. [laughs].
Louko: Something like that. I just think that if this works and Virgin Galactic wins, this is going to be possibly one of the best investments for the next decade. I really truly believe that but there are just so many question marks that I have no clue where it would even be going at that point that. I think I rank this eighth, closer to the bottom. But there's just so many question marks that I don't know about the industry at large and where that is moving as a whole much less one specific company in this industry.
Hoium: I'll put that a little bit into context. The stock's market cap right now is $2.4 billion dollars. I think what you're basically saying is, "I don't want to take the risk now but I would maybe take the opportunity later."
Hoium: Let's say the stock 4xs in the next two years because they get to commercialization. I think that is a reasonable approach to this to say, "Hey, I'm willing to miss out on that gain because I think it's a higher likelihood that it goes from a $10 billion valuation to a $100 billion valuation than it goes from 2.4-10." Your risk is just very different on those two things. I think that's a reasonable way to approach it.