Company Name: Virgin Galactic Holdings
Entry Price: $26.85
Target Price: $45.00
Projected Yield: 67.5%
Time Line: 9 months
About Virgin Galactic
Virgin Galactic is a US based company, which is focused on modern air and space vehicle manufacturing The company also has some plans to develop tourist suborbital space flights and small artificial satellites.
What's the Idea?
Capitalize on a stock that may rise with sharp price decrease, NASA contracts, and excellent room for potential.
Buy Virgin Galactic Shares >>
Why Trade Virgin Galactic?
Reason 1: Unsuccessful Test Flight
On December 12, 2020, Virgin Galactic launched a test flight of its aircraft, which was unsuccessful. They carried the VSS Unity suborbital aircraft to a predetermined altitude and dropped it, but the VSS Unity rocket engine did not start. As a result, the vehicle did not reach the lower space boundary; however, VSS Unity landed safely.
Despite an unsuccessful test flight, this could be beneficial from the marketing point of view: the suborbital tourists-to-be will now see that VSS Unity can safely return to Earth even in case of an engine failure. On the other hand, with this unsuccessful test flight, Virgin Galactic stock fell significantly, declining by 30% compared to the November highs.
The stock was under additional pressure when an insider share selloff occurred, as Chamath Palihapitiya sold 3.80M shares worth $33.75M to finance other projects of his own.
Such large drawdown may prove to be a good opportunity to add this stock to portfolio.
Reason 2: Current Situation
Virgin Galactic planned to launch its first commercial tourist flights in 2020, which would make it break-even in 2021. However, when the pandemic arrived to New Mexico, the company had to re-schedule the first flight to 2021.
Curiously, this has both its advantages and disadvantages. The company will be of course still suffering losses and get no earnings because of the delay, but, on the other hand, it now has a good opportunity to run additional checks and minimize risks.
The company has $741M in liquid funds, while the loss is at $200M to $250M per year, which means VG has enough funds to run the business.
Meanwhile, Blue Origin and SpaceX, which are the closest competition, are moving forward as well, as both companies have significant advances in aerospace flight arrangements, which could also lead to tourist space flights. However, Virgin Galactic is currently the only one to have announced space tourism as its focus domain, while it is also making significant progress in this direction.
Reason 3: Virgin Galactic Analyst Estimations and CEO Outlook
In November 2020, Virgin Galactic's CEO announced that, after launching commercial tourist flights, the company aimed at reaching 400 flights a year and generating $1B earnings, per annum. The ticket cost would increase with high demand for space tourism, he added. Previously, the pre-ordered tickets had cost from $200K to $250K, with one such flight (six people) being able to generate $1.50M.
At the same time, each flight will require a new RocketMotorTwo solid fuel engine cartridge, thus leading to an additional cost of $250K to $275K. Meanwhile, a suborbital aircraft costs around $30M to $35M, which means the company needs to launch 30 to 35 flights to break even. Such aircraft's lifespan, however, is around 10 years, which means significant profits may be generated from each aircraft's life cycle.
Currently, Virgin Galactic's market cap is at $5B. In case at least one-fourth of the estimated earnings per year is achieved ($250M), the P/S ratio will reach 20x, which means VG value may increase drastically once it is able to launch space flights.
Reason 4: NASA Contract
In early December, Virgin Galactic won NASA contracts for the flight and integration services under the Flight Opportunities program. Virgin Galactic will join four companies involved into these contracts, which are worth $45M and have a maturity date on July 31, 2023. As a result, the company gained not only an additional source of income, but also showed it is regarded as a serious market player by the major industry leaders.
How to Use the Idea
- Buy Virgin Galactic shares at $26,85.
- Allocate no more than 2% of your portfolio amount. To build a balanced portfolio, you can use recommendations by our analysts.
- Sell the stock when the price is at $45 per share.
How to Buy Virgin Galactic?
If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.
After opening an account, you can buy shares in either of the following ways:
Freedom24 Web Platform: In the Web Terminal section, type SPCE.US ( Virgin Galactic ticker in the NYSE) in the search box, and select Virgin Galactic Holdings Inc. in the results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.
Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that will show up, type SPCE.US (Virgin Galactic ticker in the NYSE) , and select Virgin Galactic Holdings Inc in the results. You will then see the stock in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of shares you want to buy and click Buy.
Buy Virgin Galactic stock, don't miss the first tourist space flights!
Buy Virgin Galactic Shares >>
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