Virgin Galactic Shares Surge 30% After Announcing $450,000 Tickets To Space

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Topline

Shares of British-American aerospace company Virgin Galactic skyrocketed Tuesday after the firm, founded by billionaire Sir Richard Branson, announced it will soon start taking reservations for its first commercial space flights, but the stock is still far from last year’s all-time highs which analysts doubt will return anytime soon.

Sir Richard Branson, founder of Virgin Galactic, rings a ceremonial bell on the floor of the New … [+] York Stock Exchange (NYSE) to promote the first day of trading of Virgin Galactic Holdings shares on October 28, 2019.

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Key Facts

Virgin Galactic surged as much as 33% Tuesday afternoon to a one-month high of about $10.91, helping the stock pare losses of more than 80% over the past year.

Ushering in the gains Tuesday morning, Virgin announced it will start selling tickets on Wednesday for a 90-minute trip to space at $450,000 apiece—marking the 17-year-old company’s first-ever public sales.

In the release, the firm said it plans to sell 1,000 tickets for the first commercial flights set to start launch from its New Mexico spaceport “later this year,” and added that passengers would experience “several minutes of out-of-seat weightlessness” and “breath-taking views of Earth.”

Tuesday’s surge follows a dismal rout for Virgin Galactic shares, which have plummeted roughly 80% from an all-time high of $57.51 in June when investors plowed into the stock amid anticipation of Branson’s historic first trip to outer space.

Despite the soaring shares, analysts still aren’t very bullish on the billionaire-backed space company: Bernstein analyst Douglas Harned lowered his target on the firm’s shares to $10 from $22 last week, warning he doesn’t expect the firm will start breaking even until 2027.

Harned said a $425 million debt offering announced last month indicates the firm may need more cash than previously expected in the short term—even after raising $500 million from investors last summer in an offering that ultimately tanked shares.

Key Background

Virgin Galactic shares have been on a wild ride during the pandemic. The stock nearly tripled as retail investors plowed into heavily shorted stocks in the first quarter of last year, but then tumbled as the fervor wore off. The burgeoning industry around space exploration has also been volatile, albeit to a lesser degree. The $21 million S&P Kensho Final Frontiers ETF, whose top holdings include Virgin Galactic, Maxar Technologies and Lockheed Martin, has fallen nearly 15% from an all-time high set last summer. With its Tuesday announcement, Virgin Galactic joins a crop of billionaire-founded firms taking tourists to space. In September, Elon Musk-founded competitor SpaceX made history with the first all-civilian crew, launching billionaire entrepreneur Jared Isaacman to space for an undisclosed price last year, while Amazon Founder Jeff Bezos says his Blue Origin has made close to $100 million in ticket sales.

Big Number

$5.4 billion. That’s how much 71-year-old Branson was worth after Tuesday’s stock surge, according to Forbes.

Tangent

Booming fanfare helped space infrastructure companies raise a record $14.5 billion of private investment last year, more than 50% higher than the previous year, according to a report from New York-based firm Space Capital. Despite the record year, however, Space Capital warned that a flurry of newly listed space companies, including many (like Virgin Galactic) that are years away from profitability, may be adversely affected as rising interest rates slam technology and growth stocks this year. “Much of the momentum we saw in 2021 came at the cost of deep diligence, which increases the risk for investors,” Space Capital managing partner Chad Anderson said in the report.