Virgin Galactic Stock Makes for a Rough But Richly Rewarding Ride

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The past two weeks have been monumental for Virgin Galactic Holdings (NYSE:SPCE). Company founder Richard Branson made a successful flight to the edge of space, kicking off the era of billionaires in space, and — much more importantly for investors and SPCE stock — the era of space tourism.

Virgin Galactic (SPCE) billboard on the New York Stock Exchange, across from the Fearless Girl statue. aerospace stocks

Source: Tun Pichitanon / Shutterstock.com

Branson’s flight helped to propel SPCE stock into orbit. However, since then a combination of a competing flight by Jeff Bezos and a planned Virgin Galactic stock offering have made for a bumpy return to Earth for SPCE.      

SPCE stock is currently trading around the $31 level. That’s down 45% from its $55.91 June 25 close after it was announced Virgin Galactic had received FAA approval for a commercial flight.

At this point, SPCE is showing signs of stabilizing. Does that mean now is a good time to snap up shares in anticipation of a coming space tourism boom? Or are shares of Virgin Galactic likely to drift down closer to the $16 level they went for in May? Even worse, could they land in the $10 range they settled in for the two years after the company went public in 2017?

Let’s take a closer look.

Virgin Galactic and Richard Branson Reach the Edge of Space

Virgin Galactic shares began gaining steam through May. The company completed the third test flight of its VSS Unity spacecraft. That was capped by a single-day gain of 39% for SPCE stock on June 25. The trigger for that jump was FAA approval for Virgin Galactic to launch a commercial space flight, with passengers. 

On July 11, the company did just that. The spacecraft reached an altitude of over 50 miles before gliding back to Earth. Among the crew onboard SpaceShipTwo was Virgin Galactic founder Richard Branson.

Blue Origin and Jeff Bezos One-Up Virgin Galactic

The market’s euphoria over the successful Virgin Galactic flight was short-lived. 

First, competition quickly reared its ugly head. On July 20, rival Blue Origin launched Jeff Bezos into space alongside several passengers. In the meantime, Bezos went on the offensive to claim Virgin Atlantic’s flight was a “high-altitude plane” not a spacecraft, and that it hadn’t actually left the atmosphere to cross into space. With Elon Musk and his SpaceX still determined to colonize Mars, this month marked the point where the billionaire space race truly began.

By taking passengers, the age of space tourism has officially begun as well. Technically, the first space tourist flew aboard a Russian rocket to the International Space Station in 2011. However, that was a special arrangement that has only been repeated a handful of times. With Virgin Galactic and Blue Origin, the advent of commercialized space tourism has truly arrived.

SPCE Stock Offering

The bigger story in terms of the recent fall of SPCE stock was Virgin Galactic’s post-flight stock offering. The plan to sell $500 million in shares immediately sent SPCE spiraling, and it’s only recently stabilized.

Should you be concerned about diluted share value? InvestorPlace’s Luke Lango makes the argument that the stock offering is actually a “blessing in disguise” for investors. That money will provide the financial runway for Virgin Galactic to fund its growth as it scales up to regular commercial spaceflights.

The space market is estimated to be worth $350 billion today. However, with commercial space tourism now in the mix, Bank of America Merrill Lynch is projecting the value of the space industry to reach $2.7 trillion over the next three decades.  

The Bottom Line on Virgin Galactic Stock

Virgin Galactic stock currently earns a “B” rating in my Portfolio Grader. Space travel involves risk; there is competition as well. It’s not just Blue Origin now in the game — SpaceX is expected to send passengers into space next year as well.

However, with more than 20 million Americans now considered to be millionaires — and many more globally — there should be no shortage of paying customers for these commercial spaceflight pioneers to fight over. Virgin Galactic’s last published ticket price of $250,000 for a short sub-orbital flight is actually a bargain compared to the $55 million each passenger has reportedly paid for a SpaceX flight. Virgin Galactic has 600 customers already signed up.

If you want a piece of that space market before it takes off in value, SPCE stock is a way to do it. And at current prices, it’s likely to have considerable upside over the next year, with ongoing growth potential.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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