Investing

Virgin Galactic Holdings, Inc. (SPCE): Commercial Space Tourism Closer Than Ever

Richard Branson's side-company Virgin Galactic has received approval for a full commercial launch license from the Federal Aviation Administration. The stock is trading at an all-time high, but to what heights can this stock grow?

Following a successful test flight last month, the FAA has licensed Virgin Galactic (SPCE) as spaceline, it is allowed to fly customers to space. With a market capitalization of over $13 billion, the stock has rocketed over 300 percent higher with respect to May low’s as short interest on the stock was high, a short squeeze following the positive news was inevitable. The company has yet to become profitable, but is now one step closer to their first commercial flight into space for which its charging $250.000 a seat, a steal for many millionaires in the United States. The company that went public in 2019 through a SPAC of current chairman Chamath Palihapitya. Interestingly, Chamath Palihapitya sold its entire stake at the beginning of May this year, selling 6.2 million shares at an average price of $35, netting almost $211 million. Currently, the stock is trading above the 50’s making his move questionable to say the least. Palihapitiya still indirectly owns 15.8 million shares via the investment vehicle, SCH Sponsor Corp, with his business partner Ian Osborne who facilitated the SPAC acquisition in October 2019.

The Space Success Story After Years Of Development

The company’s spacecraft gets carried towards the edge of space, then the aircraft releases the spacecraft, which fired its rocket engine and accelerates to extremely high speeds, as can be seen in the footage below by Virgin Galactic. The company already has over 500 reservations, which will only accumulate higher as footage and space tourism popularity will rise. However, the company has to do several tests before it can actually start its commercial operations in space. Critics fear that the high competition in the space tourism market will lead to low margins and no profitability on the long run. However, space enthusiast point to the fact that innovations could drive down costs of this new enterprise.

The Ultimate Dream: Two Million Space Tourists And Hypersonic Travel

In a statement the current board showed they think big, as Virgin Galactic CEO George Whitesides talked about two million space tourist could get into space in the coming years. Even more if costs will be driven down, as it a space flight could become mainstream for upper class people. Just like competitors the company is looking at possibilities for commercial space travel, cutting flight times. Critics have pointed to the drastic impact such flights could have on the environment if this dream becomes reality. These space companies have the goal to break down and disrupt the airline business forever. However, even the most optimistic scenarios painted by Virgin’s engineers is that it will take at least one more decade until this could become reality.

At current valuations this stock looks expensive, but considering the Tesla (TSLA) stock frenzy nothing is unimaginable. With a market capitalization which is comparable to large airlines in the United States, stepping in at this point could prove risky. However, if the market plays out as Virgin depicts it, this stock is set for new highs.

Disclaimer: The writer of this article does not hold Virgin Galactic Holdings, Inc. (SPCE) stock, this article should not be interpreted as investment advice or anything like that.

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