Why Virgin Galactic Stock Gained Altitude This Week

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What happened

The countdown to Richard Branson’s voyage into space has begun, and investors are getting excited. Shares of Virgin Galactic Holdings (NYSE:SPCE) were up nearly 14% for the week, as of 2 p.m. EDT Thursday, continuing what has been a turbulent few weeks for the space tourism stock.

So what

If all goes to plan, Branson will take his first flight aboard a Virgin Galactic spacecraft on Sunday, July 11, winning the billionaire space race against Jeff Bezos and ushering in the era of space tourism. Virgin Galactic shareholders have been waiting a long time for this day (Branson had originally hoped to go last summer to celebrate his 70th birthday), and investors are understandably excited.

Image source: Virgin Galactic.

Analysts, however, have been much more lukewarm. The event will without a doubt be an important milestone for the company, but there is still work to be done. Virgin Galactic still has a few more test flights ahead of regular tourist service, and even if it does ramp up commercial operations in early 2022 there is still a lot of doubt about the size of the market for six-figure tickets into space.

Virgin Galactic shares spent most of the week on a downward slope before getting a big boost on Thursday, thanks to investment bank Cowen raising its price target to $51 from $23. Analyst Oliver Chen called the launch a positive development, and said it should give the company a chance to market itself as “an experiential and luxury leader in commercial space flight.”

The stock performance for the week continues a pattern in the shares that could leave investors airsick. The stock was up big two weeks ago after Virgin Galactic won regulatory approval for passenger space flight, but fell back to Earth some last week on valuation concerns.

Now what

Shares of Virgin Galactic are now up more than 220% from mid-May, up 115% for the year, but still below the highs reached in late February. And there is little reason to think the turbulence will end after this weekend’s flight.

These are exciting days for Virgin Galactic and the entire space tourism industry, but investors need to be mindful that this remains a challenging industry with a lot of uncertainty. And with the company valued at nearly $12 billion, much of the hoped-for growth over the next year is arguably already priced in.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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