Virgin Galactic Stock Is Getting Clobbered After Blue Origin’s Success. Here’s Why.

1 year ago 150

July 20, 2021 12:17 p.m. ET

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Courtesy Virgin Galactic

Virgin Galactic Holdings isn’t the lone successful abstraction tourism franchise. Nine days aft Galactic successfully ferried founder Sir Richard Branson into space, Jeff Bezos’s abstraction institution Blue Origin successfully completed its archetypal crewed flight. That mightiness beryllium weighing connected Galactic shares Tuesday.

Virgin Galactic (ticker: SPCE) is down astir 5.1%, astatine $30.76, successful caller trading. The S&P 500 and Dow Jones Industrial Average are up 1.5% and 1.7%, respectively, rebounding aft Covid-19 fears resulted successful a steep Monday selloff.

Investors mightiness not similar contention successful the abstraction tourism race. Blue Origin, during the livestream of its flight, said that it was unfastened for concern and acceptable to instrumentality abstraction reservations. Virgin Galactic has amassed a backlog of astir 600 imaginable astronauts. That would enactment retired to a mates of years of demand. Wall Street envisions lone astir 200 commercialized flights for Galactic successful 2022.

The terms for Galactic’s archetypal flights is believed to beryllium astir $250,000 per seat. A Barron’s email requesting the terms hasn’t been returned yet.

But contention whitethorn beryllium little of a origin than the stock’s caller run-up.

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Galactic banal has been connected occurrence lately—and what goes up yet comes down. Investors were bidding up shares successful anticipation of bully news. Now that the bully quality of a palmy Branson formation has passed, banal buyers person paused and are waiting for the adjacent large announcement oregon event.

Another formation test—or the possibly a day for the commencement of regular commercialized operations—could suffice arsenic a catalyst. Wall Street expects Galactic to commencement making regular flights astir the extremity of the twelvemonth 2021. Canaccord expert Ken Herbert told Barron’s precocious helium believes aboriginal 2022 is much likely.

Herbert rates Galactic banal a Buy and has a $48 terms target. That’s up from $35 conscionable earlier the July flight, erstwhile the banal was trading astatine astir $50.

It was pugnacious for Herbert, and expert peers, to support up. Galactic shares went from $15 to $50 implicit the people of astir 2½ months starting successful aboriginal May. That Icarus-like emergence is arsenic overmuch arsenic crushed the banal is down contiguous arsenic the Blue Origin flight.

Galactic banal is inactive up astir 30% twelvemonth to date, amended than comparable gains of the wide market. The way its taken to get determination however, has apt resulted successful question sickness for shareholders.

The different crushed shares person been week is simply a banal merchantability announced aft Galactic’s palmy flight. Virgin Galactic said connected July 12 it would rise up to $500 cardinal by selling caller shares. More shares dilute existing shareholders’ stakes. And much sellers than buyers—even if the seller is the institution itself—always results successful banal declines.

Write to Al Root astatine

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