Shares of Virgin Galactic (SPCE +3.23%) rose 2.3% through 11 a.m. ET Tuesday, recovering a bit after two days of declines sparked by a big price target cut at Truist Bank.
An off-hand remark by a NASA official, reported yesterday by Gizmodo, appears to be the catalyst for investors giving Virgin Galactic stock another look.
NYSE: SPCE
Key Data Points
What Virgin Galactic's passenger said
If you recall, on Wednesday of last week, Virgin Galactic announced Nov. 2 as the date for its upcoming Galactic 05 space tourism flight. The company described Galactic 05 as not only its sixth crewed spaceflight in six months but also as its second "space research mission," carrying a trio of scientists, including former NASA Associate Administrator Alan Stern.
In the Gizmodo article describing the mission, Stern was quoted as saying that part of his role on the flight will be "training -- in space -- for future space experiments I will be performing with NASA funding." He also observed that "Virgin's suborbital costs are low enough to open up space training actually in space as a viable opportunity, and that is a game changer."
Why investors might see an opportunity for Virgin Galactic
That opens up the possibility that Virgin Galactic might, at some point in the future, be able to turn NASA training flights into a new revenue stream -- and from an investor's perspective, that might be a potential "game changer."
And Virgin Galactic really could use a game-changer. You see, in the course of describing its Galactic 05 mission, Virgin Galactic noted that (1) its future flights will carry four paying passengers instead of three (but also instead of six), such that total revenues per flight should average about $1 million going forward, and (2) Galactic 05 will be the company's final spaceflight of 2023.
As management explained, Virgin Galactic must take a month off "for routine, planned annual vehicle inspections before recommencing with standard pre-flight readiness procedures." And if we extrapolate these facts across the course of a year, it seems to imply that the maximum revenue Virgin Galactic can make in a year is now not 12 months times $1 million a month equals $12 million a year, but rather ... 11 months times $1 million equals $11 million a year.
For a company currently spending $600 million-plus in annual operating costs, that's actually not great news and implies Virgin Galactic will continue running massive losses for the foreseeable future. Unfortunately for investors, that's not a great reason to buy this space stock today.
