Last night, space tourism pioneer Virgin Galactic (SPCE -1.94%) announced its earnings from the first quarter with the only spaceplane it has. The news was not great, and as of 11:05 a.m. ET on Wednesday, the stock is down 7.1%, making it officially a penny stock again.
The decline follows its 10% jump on Monday after the company announced progress on its do-or-die project to build a new Delta-class spaceplane to replace the current Unity-class spaceplane -- the only craft the company has, and one that's due to be retired next month.
First-quarter Q1 earnings
Virgin Galactic's news wasn't all bad. Revenue came in at $2 million, ahead of the $1.9 million Wall Street forecast. Losses were $0.25 per share, better than the $0.29 that the Street feared. Revenue was higher, and losses lower, than a year ago as well.
But the good news ended right there.
Turning to guidance, Virgin Galactic warned investors that second-quarter sales will be closer to $3.5 million than the $3.8 million that Wall Street was predicting. Management also said it's going to continue burning a lot of cash -- a bit less than the $126 million in the first quarter, but still between $110 million and $120 million this quarter.
Is Virgin Galactic stock a sell?
And that's the most important number. Virgin Galactic only has about $867 million in cash, equivalents, and marketable securities (against about $660 million in debt). If it keeps burning cash at even just $110 million per quarter, that gives the company only two years before it's out of money and has nothing left but debt on its balance sheet.
Two years might be enough time to get the first Delta-class spaceplane built, tested, and flying, so Virgin can start generating revenue again. But it also might not be. If anything happens to delay the program, Virgin risks running out of cash at the moment it needs it most. Investors today seem to be waking up to that very real risk.
