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The post Virgin Galactic Stock Crashes to Earth on Analyst Downgrade appeared first on Millennial Money.
After flying high in recent months due to investor excitement surrounding successful test flights, shares of Virgin Galactic (NYSE: SPCE) crashed back down to Earth on Wednesday after receiving an analyst downgrade.
The news comes shortly after Virgin Galactic announced a massive price increase, with tickets now costing $450,000, up from the previous price of $250,000.
As of 12:20 p.m. EDT, Virgin Galactic stock was down by 14%.
No more positive catalysts on the horizon
Morgan Stanley executive director Kristine Liwag downgraded her rating on Virgin Galactic from equal weight (equivalent to a neutral) to underweight (equivalent to a sell) while reiterating a price target of $25.
The stock had climbed to nearly $58 over the summer amid enthusiasm for Virgin Galactic’s flight that sent billionaire co-founder Richard Branson to the edge of space just days before Amazon.com (NASDAQ: AMZN) founder Jeff Bezos made a similar journey aboard a New Shepard rocket made by his startup Blue Origin.
With those historic flights completed, Virgin Galactic is unlikely to have much positive news to drive the stock higher, in Liwag’s view.
“We expect shares to return towards long-term valuation of $25 as the company completes a catalyst rich period after Sir Richard Branson’s successful flight and transitions to a prolonged period of no flights,” the analyst wrote in a research note to investors. “After the expected flight of Unity 23 in September 2021, the company’s sole mothership, Eve, will be grounded for an 8 month enhancement period.”
While Virgin Galactic conducts maintenance on the spacecraft, it will not be able to perform any additional flights until the summer of 2022. The company does not consistently generate revenue since it is still developing its vehicles, although it occasionally brings in sales through other ways.
For example, Virgin Galactic’s test flight in May carried a revenue-generating payload for scientific research, and the company recognized $571,000 in revenue in the second quarter. The upcoming flight in September will be a revenue-generating mission with the Italian Air Force.
Taking a long-term view
Liwag acknowledges that the upgrades to Eve are positive in the long-term as Virgin Galactic is investing in capacity, but cautions that investors will need to be patient.
Once the upgrades are completed, Virgin Galactic will dramatically shorten turnaround times and be capable of flying more frequently. Meanwhile, Virgin Galactic is still working on a next-generation “Delta class” spaceship.
The company recently filed to raise $500 million through an at-the-market (ATM) offering, and Liwag expects that Virgin Galactic will use the bulk of that cash to help fund the development of its Delta fleet. Those spacecraft are not expected to start commercial flights until at least 2024 or 2025, according to the analyst.
The post Virgin Galactic Stock Crashes to Earth on Analyst Downgrade appeared first on Millennial Money.
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