Virgin Galactic (NYSE: SPCE) stock is on a tear -- or at least it was.
From Dec. 27 through the first trading day of this week, Tuesday, shares of the iconic space tourism stock (that hasn't yet actually sent any paying tourists into space) soared a shocking 70%. Virgin Galactic put together an amazing (and perhaps unlucky) winning streak of 13 consecutive "up" days. And yes, this streak snapped with a resounding CRACK! on Wednesday as Virgin Galactic shares tumbled 12% in a falling stock market. But now the question arises: Which way will Virgin Galactic go next?
Will its winning streak resume, or is this the start of a new downtrend?
NYSE: SPCE
Key Data Points
Promises, promises
The answer, I fear, is: It depends.
It depends most specifically on what exactly happens when Q2 2023 rolls around, and investors get to see if Virgin Galactic will launch its first batch of paying tourists into space (as it has promised) or instead delay the launch of commercial operations (as it has done so many times already).
Now the good news is that, at last report, Virgin Galactic appeared on course to begin commercial spaceflights in Q2. The big news in its Jan. 12 press release involved an "evolved ... leadership structure" in which one Virgin Galactic executive (Aerospace Systems President Swami Iyer) is departing, while the heads of three more divisions -- Spaceline Missions and Safety, Technical Operations, and Programs and Engineering -- remain in place.
At the same time, management confirmed that it has completed upgrades of its VMS Eve and is preparing for ground tests to be followed by flight tests of the mothership (the airplane that carries Virgin's spaceplanes to altitude before they rocket to space). And while Virgin Galactic gave no updates on the progress of the VSS Unity spaceplane, it did confirm that in general, "commercial service remains on track to begin in Q2 2023."
So what does this mean for Virgin Galactic stock?
What this means for Virgin Galactic stock
Giving the company the benefit of every doubt, what this means is that between now and June 30, Virgin Galactic intends to:
- Complete both ground and flight tests of its mothership.
- Complete work on its spaceplane, too, which, as of early November at least, was still awaiting "validating [of] modifications ... with multiple scheduled test flights" on the calendar.
- Conduct a long-awaited, revenue-generating research flight for the Italian Air Force.
- And finally, as a culmination of all the above, conduct its first-ever commercial tourism spaceflight.
This is a pretty full schedule the company has laid out for itself, no doubt. And there are two ways of looking at it: First, and most optimistically, if Virgin Galactic truly is on track to accomplish all of the above before the end of Q2, then things must be going swimmingly down at Spaceport America, and the company is performing well above the levels investors have been trained to expect over the past several years.
Assuming this is the case, then at an estimated $1.5 million in revenue per commercial spaceflight -- plus a bit more for sending the Italians to space -- Virgin Galactic investors can anticipate a blockbuster Q2 earnings report. Indeed, if all goes as planned, the company might report more revenue in this single upcoming quarter than it collected in the last four reported quarters combined.
The alternative, of course, is that Virgin Galactic's proposed schedule might be a bit overambitious for the company. In that case, Virgin Galactic may turn out to have set its investors up for some serious disappointment if July rolls around...and Virgin Galactic tourists still haven't made it into space.
Should this be the way things play out, Virgin Galactic investors will find themselves in possession of a stock trading for 834 times trailing revenues, with zero profits, a cash burn rate approaching $329 million per year, and little revenue to offset the cash burn. Suffice it to say this would be more than a little disappointing for them.
So fingers crossed that management knows what it's talking about when it says it's finally got its ducks in a row and will be ready to take flight in Q2.
