Space tourism has the potential to grow into a massive market, and Virgin Galactic (SPCE 3.15%) is one company leading the charge. Two years ago, Virgin Galactic founder Richard Branson broke the stratosphere for the first time, beating Jeff Bezos and Blue Origin in the billionaire race to space.
It has taken a lot for Virgin Galactic to get off the ground, literally and figuratively, and the company still has a ways to go in its effort to prove itself a worthwhile investment. If you purchased $1,000 in Virgin Galactic at the start of 2020, not long after it went public, your investment would have peaked at $5,144 in early 2021 before falling to a value of $335 today.
Here's what investors need to know about the company, its vast opportunity, and the uphill battle it faces.
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A story 17 years in the making came true in 2021
Founded in 2004 by billionaire Richard Branson, Virgin Galactic aims to bring space tourism to the masses. It took 17 years and countless launches to take space tourism from science fiction to reality when Branson lifted off in July 2021.
Virgin Galactic is the first spaceline to receive Federal Aviation Administration approval to carry commercial customers to space, and it has received a fair level of interest from customers. Tickets now cost upward of $450,000, and through March 31, it had 800 reservations, with tickets sold representing $211 million in future revenue.
But pushing the boundaries of space tourism isn't cheap, and Virgin Galactic is hemorrhaging money. Last year, the company lost $500 million while bringing in just $2.3 million in revenue. In Q1, it lost another $159 million compared to $392,000 in revenue.
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The market opportunity is huge, and several players are chasing it
Space tourism has the potential to become a massive industry. Grand View Research expects the space tourism industry to grow at a 40% compound annual rate through 2030. That opportunity has attracted competitors including Blue Origin, SpaceX, and many others.
While the prospect of space tourism is exciting, predicting which players may come out on top isn't easy. Getting humans safely into orbit and back again requires significant time and capital. Virgin Galactic has had to issue a considerable amount of stock to fund its venture: Its outstanding share count has grown by 242% since the company went public in 2019.
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Most investors should avoid this stock for now
Virgin Galactic has made tremendous progress. In June, it completed its first commercial space flight, carrying a pair of Italian Air Force officers and an engineer with Italy's National Research Council to conduct scientific experiments. It plans to launch its next flight as early as Aug. 10, and plans to launch flights monthly after that.
Yet Virgin Galactic still has a lot to prove as an investment. Its progress has come at a significant cost to shareholders, who have been heavily diluted already. The stock will likely see significant price swings, making it best suited for risk-tolerant investors willing to take a small stake and hold on through those swings. However, most investors are best off avoiding it until its financial situation improves significantly.
