Virgin Galactic Holdings Inc. is a very sparse enterprise when it comes to the usual benchmarks, things like sales, profits or customers.
What Richard Branson’s space transport company does have, however, are hedge funds and other investors who are convinced it will establish a new space-tourism industry and fly people across continents at hypersonic speeds.
That unfettered enthusiasm is responsible for driving up Virgin Galactic’s stock by almost 200% so far this year, conjuring comparisons to Tesla Inc.’s meteoric rise. Virgin has more than doubled over an eight-day winning streak, hitting a high of $42.49 on Feb. 20 from below $7 in late November. That took its market value to almost $8 billion from $2.4 billion in early January. The stock took a breather in a couple recent sessions but rose by 1.2% even in Monday’s market crash.
“This is all momentum driven,” analyst Alex King of Cestrian Capital Research said. “It’s not real yet. It will become real, but it’s not real yet.”
Affluent Customers
At some point, Virgin Galactic could indeed become a very profitable company with near-daily space flights, high margins, a deep and affluent customer base and an early-mover advantage in the nascent field of crossing the Atlantic and Pacific in an hour or two via suborbital travel at hypersonic speeds.
Or, it could be out of business in, say, a year.
“This stock is the essence of speculation,” King said. “It doesn’t trade on numbers and we don’t think it will trade on numbers for a long time.”
In November, Virgin reported a net loss of $51.5 million for the third quarter and $832,000 in sales. The company has about 600 customers who have each paid as much as $250,000 for a ticket to ride into space; it stopped taking reservations in December 2018.
The company reports fourth quarter and 2019 results on Tuesday and hosts its first conference call. Virgin Galactic Chief Executive Officer George Whitesides has said the company will begin customer flights this year, with Branson expected to be among those on the first commercial flight.
“Management has guided to a very attractive financial outlook a few years from now, but there are also a lot of thematic reasons to own it and I think that’s been the driver lately,” said Darryl Genovesi, an analyst with Vertical Research Partners, who has a “buy” rating on the stock.