Virgin Galactic Holdings (NYSE:SPCE) has experienced a tumultuous journey for shareholders, witnessing a meteoric rise from $7.29 in December 2019 to surpassing $50 in June 2021, only to decline to its current valuation of $2.04, translating to a market cap of $767 million. As the space tech company seeks to rebound, let’s explore whether Virgin Galactic stock could stage a comeback in the coming year.
Is Virgin Galactic Stock a Viable Investment?
Virgin Galactic, an aerospace and space travel company, is in the process of developing a spaceflight system to provide customers with a transformative experience. In Q3 2023, the company reported a revenue surge to $1.7 million from $800,000 in the previous year’s quarter. Commercial spaceflight and membership fees fueled this growth, with six successful spaceflights in under six months contributing to a projected total sales figure of $7 million for the year, up from $2.31 million in 2022.
With $1.1 billion in balance sheet cash, Virgin Galactic is actively working to reduce operating costs in response to a challenging macro environment. Workforce restructuring and substantial investments in the development of Delta Class spaceships are part of the company’s strategy.
Despite a reported net loss of $104.6 million in Q3 and anticipated cash outflows of $135 million in Q4, Virgin Galactic expresses confidence in its liquidity, affirming its ability to bring the first two Delta ships into service and achieve positive cash flow by 2026.
The Path to Skyrocketing Stock Value
Virgin Galactic aims to solidify its presence in the space travel sector by transporting individuals beyond Earth’s atmosphere. Successful test flights in May and a commercial launch in June set the stage for monthly flights, albeit with a rise in operating expenses to $25.6 million in the September quarter. To curtail costs, Virgin Galactic is focusing on the development and manufacturing of Delta ships, a larger spacecraft expected to enhance per-flight revenue.
Furthermore, the company anticipates a reduction in research and development (R&D) costs once Delta ships are operational. In Q3, Virgin Galactic allocated $45 million to R&D, representing 7.5 times its sales.
Target Price and Analyst Outlook
Analysts tracking SPCE stock project a sales increase from $2.31 million in 2022 to $11.42 million in 2024, accompanied by a narrowing loss per share from $1.89 to $1.12. Among the nine analysts covering SPCE, recommendations vary, with two suggesting a “strong buy,” three a “hold,” two a “moderate sell,” and two a “strong sell.”
The average price target for SPCE stock stands at $2.88, indicating a potential upside of over 40%, while the highest target is an ambitious $5.00, reflecting a premium of 143% over current levels.
In conclusion, Virgin Galactic stock represents a high-risk investment, given its operational losses and ambitious valuation. Investors must carefully weigh the potential for a significant surge against the inherent risks associated with the space tech industry.
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