What a few days for space investors. First, SpaceX brought NASA astronauts back to the International Space Station from a two-month mission. Then space-tourism pioneer Virgin Galactic announced second-quarter results after Monday’s business ended.
The results were fine, if lacking, but it was a side dish for Virgin Galactic (ticker: SPCE) investors who received the stock on Monday. The pioneers of space tourism are far ahead of expectation – in hyperic travel. Now analysts and investors will have questions for management about cash allocation and hypersonic timing when management speaks this evening.
For starters, there was a second quarter report. Virgin Galactic lost 30 cents per share. Wall Street expected a loss of 26 cents. But earnings don’t matter because Virgin Galactic does not yet generate sales.
The company plans to ramp up sales in late 2020 and early 2021.
In May, the stock bounced after the company reported a 30 percent loss per share for the first quarter. During that quarter, Galactic launched an initiative for tourist-astronauts to reserve a spot in Galactic’s flight queue. The company received commitments from 400 potential tourists representing $ 100 million in sales.
The updated commitment number is 700 astronauts. Representing a gradual increase of 75%. Investors can be confused in press releases. There are an additional 600 future astronauts who have already made reservations outside a first-quarter initiative called “a small step”.
It is possible that 75% of the growth was not enough for investors. It is also possible that there was some confusion. Virgin Galactic stock is down about 6% in after-hours trading.
Virgin Galactic stock was up 7% on Monday, before the second quarter results were announced. In early Monday, before the market opened, the company revealed plans for the Mach 3 Delta-wing aircraft to travel at altitudes of 60,000 feet with a capacity of 9 to 19 people.
This is a mouthful. A delta-wing is essentially a triangle. The Mach 3 is three times the speed of sound, or about 2,300 mph.
Hypersonic flight — flying at multiples of sound speed — has always been a part of Galactic’s business plan. However, investors did not think the announcements would come soon.
Despite the positive stock reaction, not everyone loves what they heard on Monday. Vertical Research Partners analyst Darryl Genovesi wrote that he was “dissatisfied and dissatisfied” with the Mach 3 announcement. “We had expected a super-quiet but still capitalization concept, white whale spacecraft decades away [Galactic’s] Unique core competency, ”added the analyst to the report on Monday afternoon. “Instead, the diagram and mission description suggest an unfamiliar supersonic air-breathing business jet concept.”
It was too soon and not enough for the Genovese. For now, though, he is a galactic bull, rating the stock at Buy. Its price target is $ 29 a share.
An optimistic response from Galactic shareholders can be expressed. It has been a great year for galactic stocks. Over 100% in stocks, comparable to the S&P 500 and Dow Jones Industrial Average.
Despite the run, Wall Street still prefers stocks – 75% of analysts cover company-rate stocks. The average buy-rating ratio for the stock in the Dow is around 55%. The average analyst price target, however, is correct about where the stock is trading. Analysts may have to increase target prices or cut ratings following the announcement of quarter numbers and Mach 3 jets.
Management calls a conference at 5pm for analysts and investors to discuss the Mach 3 journey, and there is no doubt about it.
Rolls-Royce (RR /. London) is an early partner on the Galactic Mach 3 engine. Rolls engines powered the Concorde supersonic jet.
However, Rolls stock closed down 0.5% in Forex trading. But it rallied close after Galactic news was released.
Write Al Root at [email protected]