Virgin Galactic Is a Risky Adventure for Investors

Stocks to sell

Investors with a strong love of adventure often aren’t adventurous with their money. But, if you enjoy playing with your money, then you’d likely be comfortable with betting on the shares of  Virgin Galactic (NYSE:SPCE). For everyone else, there are better investments than SPCE stock.

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

Source: Tun Pichitanon / Shutterstock.com

I know that’s resisting the joy of the party. I get it; this is a “fun” company that was founded by a “fun” guy who’s looking to take wealthy people on a ride to space.

All of this does not add up to SPCE stock being a “fun” investment for the average investor. For most of us, the fun part about investing is when your nest egg grows. That’s how we keep score. This is a serious business.

A Look at SPCE Stock

Richard Branson is a wealthy guy who definitely indulged in adventure. We’ve all read about him and seen news reports about his exploits. He approaches his businesses with a good amount of flair, which is enjoyable to watch.

About 16 years ago, Branson decided to dive into space tourism. He launched a company with the goal of developing space planes that would ferry passengers to the upper atmosphere for a high-altitude experience.

Aviation is the stuff of pioneers, with lots of engineering, testing and high costs. It doesn’t always go smoothly, either. Virgin Galactic has suffered fatal mishaps and other setbacks that historically bedevil  space initiatives.

Those problems have not kept potential passengers away from Virgin Galactic, however. Initially, the company sold tickets for $200,000 each. The price was increased to $250,000 in 2013. Virgin Galactic said recently it had received 600 reservations from people in 60 countries.

Virgin Galactic Holdings went public a little more than one year ago, on Oct. 28, 2019. The shares of SPCE stock opened at $12.34 then. Currently, it trades around $17.

SPCE stock has been volatile, which is not too surprising for a speculative investment. The stock’s 52-week high was  $42.49, while its low point in the same period flirted with penny-stock status at $6.90.

The company has a market capitalization of about $3.9 billion.

One notable investor is Aabar Investments Group, the sovereign wealth fund of Abu Dhabi, which has a one-third stake in Virgin Galactic. The company’s long-term plans call for a space-plane port in that country.

Competition in the Space

The lure of space travel, or at least travel pretty close to outer space, must be strong for folks with a lot of money.

Jeff Bezos is behind a similar push, but his Blue Origin company is doing so with much less fanfare than Branson’s. Their operating styles obviously differ.

Blue Origin’s approach differs in other key ways. For one, it won’t rely on a repurposed Virgin Atlantic 747 to head skyward. (Although, as expected with a Branson endeavor, the 747 does have a cool name, Cosmic Girl.) Rather, Blue Orion intends to take off and land vertically using its New Shepard system.

Virgin Galactic began with aggressive schedules that were brimming with confidence, even as they got pushed back. Branson’s enthusiastic forecasts have consistently been overly optimistic.

The Business Side of Virgin Galactic

In August, Virgin Galactic announced its second-quarter results. The company said it lost $63 million. For comparison, the company’s Q1 loss was $60 million.

Virgin Galactic said it spent $37 million on “research and development expenses,” which also was an increase over the $34 million spent in Q1. Meanwhile, the company said its cash and equivalents on hand at the end of Q2 totaled $360 million.

No one said space tourism was an inexpensive enterprise.

The Bottom Line

Virgin Galactic Holdings is a space tourism venture of noted British adventurer Richard Branson, with development operations based in the great Southwest U.S. The company went public last year.

Potential investors must decide whether it’s worth wagering some of their own money on space tourism. It is not an endorsement of Branson, but an investment in a risky business he founded 16 years ago. The company has a cool website, sure, but its reality has been marked by missed projections, deadly mishaps and criticism from aviation-safety officials.

Simply put, SPCE stock is a very speculative investment that should only be made with money the investor won’t miss. This is not a stock for your retirement account. This is one for play money.

That said, if you’ve got some play money sitting around and find the combination of Branson and space tourism to be irresistible, you’re not alone. Several of my InvestorPlace colleagues describe SPCE stock as a long-term play.

My suggestion, though, is to put that money to work elsewhere.

On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C.

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