Shares of Virgin Galactic (SPCE +1.88%) tumbled 2.9% through 10 a.m. ET on Friday after Truist cut its price target on the space tourism stock by two-thirds -- from $3 all the way down to just $1 a share.
In a note this morning, The Fly described Truist's move as mere collateral damage from the bank's broader feeling that aerospace stocks are being stressed and that airplane production this year is looking about 7% weaker than predicted. But that's not the only problem bugging Virgin Galactic investors this week.
NYSE: SPCE
Key Data Points
Virgin Galactic's spaceplane is getting crowded
On Wednesday, you see, Virgin Galactic announced the date for its upcoming "Galactic 05" space tourism flight. Described as a space science mission staffed with private astronauts who are also scientists, this sixth-in-a-row manned space mission for the company will maintain Virgin Galactic's promised launch cadence of roughly one flight per month -- apparent good news for the stock that completely failed to lift Virgin Galactic's share price when it was announced.
So why did Virgin Galactic's announcement worry investors?
Well, at the tail end of the press release, Virgin Galactic noted that Galactic 05 will be its last flight including an "in-flight Astronaut Instructor [conducting] training assessments" among passengers. The company noted that in the future, "the fourth cabin seat on VSS Unity will be used for additional revenue generation on future flights."
How good news becomes bad news for Virgin Galactic
Again, that sounds like good news. In addition to the usual three paying passengers seen on Virgin Galactic "Galactic" series flights 1 through 5, the upcoming Galactic flights will fly a fourth paying passenger, adding up to $250,000 in revenue per flight.
The problem is, when originally announced, Virgin Galactic's VSS Unity spaceplane was described as being able to carry six paying passengers to orbit. The fact that it has so far been carrying only three paying passengers was a disappointment (meaning Virgin was getting only half the revenue it was supposed to). But this week's news seems to confirm that the spaceplane is actually maxed out at four passengers -- and thus will never be able to carry six.
That's arguably even worse news for Virgin Galactic stock. It means the three passengers per flight we've been seeing isn't entirely a fluke, or a risk mitigation measure that would continue only while the company was getting flights started. It suggests that it's much closer to a real limit on how much revenue this spaceplane can produce for Virgin Galactic -- four $250,000 tickets per flight, or just $1 million per month.
For a company that's spending more than $40 million in operating costs every month, $1 million in revenue simply isn't enough to make this a winning stock.
