The Virgin Galactic stock (NYSE: SPCE)
Sir Richard Branson changed Virgin Galactic’s launch plan, putting him in space on short notice this month and nine days before Jeff Bezos. It remains to be seen, though, if the adjustment is beneficial for the public business.
Canaccord Genuity analyst Ken Herbert, whose firm has a buy rating on Virgin Galactic stock with a $35 price target, believes Branson may launch ahead of Bezos for “a few other reasons besides just the ego.” Overall, he believes ego is “the primary driver here.”
“Obviously, ego and being first and bragging rights are pretty important for these guys,” Herbert said.
Virgin Galactic CEO Michael Colglazier denied to CNBC on Friday that the company rearranged its spaceflight to get Branson to space before Bezos, saying it was “absolutely not” the reason.
“We only fly when we have evaluated all of our data and are confident that we are safe to fly and ready to fly,” Colglazier explained.
While Herbert is not surprised that the company is not openly admitting that it is attempting to win the billionaire space race, he does note that the move is typical of how Branson built his Virgin Group empire.
“Branson is all about marketing, publicity, and stunts, and he’s built a big part of his career, wealth, and reputation around outlandish things, and this clearly fits with that,” Herbert said.
According to the Canaccord Genuity analyst, he spoke with Virgin Galactic this morning and believes that, given the company’s previous comments about reopening ticket sales following Branson’s flight, it will “start to sell reservations again” if the trip is successful.
“There is the obvious benefit of possibly just generating some cash,” Herbert explained. “From a marketing standpoint, there is a lot they hope to build around it that could be pretty powerful.”
The stock of Virgin Galactic has risen by more than 45 percent in the last month, with the majority of the gains coming after the company received FAA approval to carry passengers on future spaceflights.
Wall Street’s average price target of $45 per share means analysts expect Virgin Galactic’s stock to fall roughly 30% from current levels, according to FactSet. However, the company does not expect to begin commercial service until early 2022, and it has yet to generate significant revenue, as Bernstein analyst Douglas Harned highlighted in a client note on Friday.
“We were unable to reach the high valuation held by the shares unless we could see a broader business opportunity.” An Underperform rating would appear to be the most appropriate. Because of the possibility of a major event, we kept our rating at Market-Perform,” Harned wrote.
Virgin Galactic has a price target of $31 set by Bernstein.
Cowen raises Virgin Galactic price
“In 2022, we are more optimistic about the prospects of a successful commercial spaceflight program. Visibility, marketing programs, and ticket sales should all help to support valuation, according to Cowen analyst Oliver Chen in a note to investors.
Cowen raised its price target for the stock to $51 per share from $23 per share, with an outperform rating. The firm’s target is 44 percent higher than the Wall Street average and represents a 15% increase over where shares are currently trading.
Virgin Galactic shares fell 3% in Wednesday’s session to close at $44.92.
Cowen emphasized that the company previously stated that it would reopen ticket sales following Branson’s flight.
“We believe ticket sales will begin slightly earlier than previously communicated,” Chen said.
Notably, a slew of risks threaten Virgin Galactic’s stock, with Cowen predicting that a delay in Branson’s spaceflight “could drive a [double-digit percent] decline.”
“Key risks include potential delays with the remaining test flights, technical issues that may arise from test flights, SPCE’s inability to achieve profitability, any safety-related issues or technical mishaps, and increased competition,” Chen added.