What happened

A Wall Street analyst has initiated coverage on Virgin Galactic Holdings (SPCE -1.09%) with an underperform rating, and investors on Tuesday are taking the advice to heart. Shares of the company traded down as much as 7% on concerns about how long it will take for the space tourism start-up to fulfill its potential.

So what

Virgin Galactic has spent most of 2022 falling back toward Earth, with the shares losing more than half of their value in the first half of the year and continuing that downward momentum into the Fall.

In part, Virgin Galactic is the victim of the market's turn away from space stocks and other, more speculative, sectors. But part of it has also been company-specific issues, including most notably Virgin Galactic's failure to adhere to its internal timeline to launch commercial service.

Virgin Galactic had once hoped to commence paid operations in 2020 in time for founder Richard Branson's 70th birthday, but the company's latest timeline suggests it will be until next year before tourists are flown into space.

Wolfe Research analyst Myles Walton mentioned those delays in a note initiating coverage of Virgin Galactic with an underperform rating and a $4 price target. Walton said that the space economy, and commercial space travel in particular, make for a "compelling story," but Virgin Galactic's numerous delays and lack of revenue justify the cautious rating.

Now what

Virgin Galactic shares have lost nearly 80% of their value in the last year. For the stock to recover, two things have to happen. The company has to work out its internal issues and get regularly scheduled service off the ground, and prove that there is ample demand for high-priced space flights to make its business a commercial success.

Both are possible, but neither is a given. And Virgin Galactic has seen others, notably Jeff Bezos' Blue Origin, catch up and in some cases move ahead while it has been stuck in neutral.

Increasingly, investors and Wall Street analysts have stopped giving Virgin Galactic the benefit of the doubt. For the stock to move higher from here, Virgin Galactic has to make good on some of its own targets.