Scarcely had Richard Branson landed on Earth after his historic journey into space, shares of Virgin Galactic (SPCE) began to fall like meteors. In trading last week, the stock crashed by 38%.
SPCE stocks are known for their volatility, and you can put the sell down on a classic case of “buy the rumor, sell the news.” The company’s post-flight decision to sell as much as $500 million worth of shares when needed didn’t help either, sending investors to the exit gates faster than you can say “take off,” or in this case — “sell.” .”
One Street Analyst Not Enthusiastic About the Drop Is Cowen’s Oliver Chen. In fact, Chen thinks the stock sale will boost “appealing liquidity.” The analyst also has a long list of catalysts to explain why the current valuation level is a ‘buying opportunity’.
“The second test flight is the foundation to build excitement for the reopening of ticket sales and enable SPCE to ramp up its commercial spaceflight program,” said the 5-star analyst. “Key catalysts/milestones we track from here are: (1) third and fourth test flights this summer, which should reflect the second test flight, (2) the timing of the next ticket sale, which should translate into cash flows, (3) ) consumer demand for ticket sales and the price of each ticket, which is expected to significantly exceed the original price of $250,000, and (4) the timing of the first commercial spaceflight.”
SPCE’s long-term goal remains to generate $1 billion in revenue “per spaceport.” This is based on approximately 400 commercial space flights per year with an HSD (high single-digit) to LDD (low double-digit) number of spaceships.
Chen estimates the figure assumes tickets are conservatively priced in the $275,000 to $300,000 range, resulting in flight-generated revenue of nearly $700 million. According to the $1 billion outlook, Chen believes the other $300 million will be based on “ancillary services” revenue.
Down to the last detail, what does it all mean for investors? Chen reiterated an Outperform (ie Buy) rating for the stock, along with a price target of $51. Investors expect a strong ~61% gain from current levels. (To view Chen’s track record, click here)
The breakdown of the consensus shows that this name evokes differing opinions from Wall Street analysts; SPCE has an average buying consensus rating, based on buy 4, hold 6 and sell 1. The shares are priced at $31.12 and their average target is $36.90, implying upside potential of 18.5% for the next 12 months. (See SPCE stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are those of the featured analyst only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.