Unlike Elon Musk's SpaceX and Jeff Bezos' Blue Origin, Richard Branson's Virgin Galactic (SPCE 1.57%) is publicly traded and has no shortage of hands buying and selling the stock on a daily basis. However, Virgin Galactic's long-term performance has been less than stellar.
Still, eager traders might find excitement in the idea that Virgin Galactic stock's moon shot could be a "better late than never" type of event. Yet, beyond late-liftoff dreams, informed investors ought to consider whether Virgin Galactic has the financial wherewithal to thrive in the long term.
Waxing nostalgic over SPAC-fueled hope
Five years ago, easy-money policy was the norm, but special purpose acquisition companies (SPACs) weren't yet the phenomenon they'd become in 2020 and 2021. Also, the idea of investing in private space flight stocks hadn't quite taken off yet.
So, where was Virgin Galactic stock five years ago? Like most SPAC stocks before their de-SPAC deal, Virgin Galactic stock (or, more accurately, its shell-company predecessor, Social Capital Hedosophia stock) traded at around $10 per share. At that time, Virgin Galactic declared itself the "world's first and only publicly traded commercial human spaceflight company."
If monetary policy was easy in 2019, then it was downright generous in 2020 and 2021. Low interest rates, in part, fueled what might be considered rampant speculation in hindsight.
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Fast-forward to 2024, and investors aren't quite as tolerant of profitless businesses like Virgin Galactic. Thus, after surging to more than $50 a couple of times in 2021, Virgin Galactic turned $1,000 into $180 in five years' time (stock price as of this writing).
In other words, there's been no payoff for holding one's shares. Along the way, Branson indicated that he doesn't plan to invest any more of his money into Virgin Galactic. On top of that, Virgin Galactic recently disclosed to the U.S. Federal Aviation Administration (FAA) on Jan. 31 that an alignment pin detached during a space flight.
The less-than-ideal bull case for Virgin Galactic stock
This certainly isn't to suggest that the news pertaining to Virgin Galactic has been all bad. Notably, the company successfully completed its 11th space flight mission. In the same press release, Virgin Galactic CEO Michael Colglazier assured that the company looks forward to expanding its flight capacity "with testing expected to start next year and commercial service in 2026."
Whether Virgin Galactic's been-there-since-$10 shareholders are willing to wait that long is another matter entirely. Perhaps glancing at Virgin Galactic's recent financials can help fence-sitting investors make up their minds.
As it turns out, Virgin Galactic's third-quarter 2023 revenue of $1.728 million dwarfs the year-earlier quarter's $767,000. Furthermore, it's not a steep decline compared to the company's second-quarter 2023 revenue of $1.871 million.
The company's earnings are also somewhat encouraging, assuming you don't mind that Virgin Galactic is unprofitable. Specifically, Virgin Galactic reported a net loss of $104.6 million in Q3 2023, compared to $134.3 million in the prior quarter and $145.5 million in the year-earlier quarter.
Virgin Galactic's cash runway may be dwindling as the company had cash and cash equivalents totaling $231.03 million at the end of Q3 2023. That's down from $358.309 million at the end of the prior quarter and $302.291 million at the end of 2022.
Thus, balance-sheet sticklers might wonder how long Virgin Galactic's cash runway will last. The company doesn't seem to be on the precipice of going broke, but if the situation worsens, it might not be too surprising if Virgin Galactic continues down its unfortunate path of raising capital by selling large numbers of shares (as the company's share count has almost doubled in the past five years), thereby risking further dilution of existing shares.
Whether Virgin Galactic can avoid taking this path is indeed a billion-dollar question for prospective and current shareholders. But then, Virgin Galactic remains speculative and will ultimately depend on the company's ability to monetize its space flights while cash still isn't a huge problem. So, if you still have moon-shot visions and can stomach the volatility, feel free to grab a few Virgin Galactic shares while the stock is far below its pre-de-SPAC price.
