Shares of Virgin Galactic (SPCE.US), which aims to commercialize suborbital tourism, are down nearly 17% today, despite the company announcing a successful test flight and positive feedback from the participating astronauts and company employees regarding the mission experience. The mission, as planned, took three employees approximately 54 miles above the Earth. This was a crucial test before commencing commercial flights, which are scheduled to begin in June.
- This mission marked the first crewed flight since July 2021. Virgin Galactic utilizes technology patented by Scaled Composites (formerly a unit of Northrop Grumman), acquired by its main investor, Sir Richard Branson. Over the years, the company has faced setbacks and a lengthy process to obtain necessary approvals, preventing the commencement of commercial services.
- Analysts at Bank of America have pointed out that the company's exclusive reliance on a single launch vehicle, the VMS Eve, poses significant risks, leading them to issue a "sell" recommendation with a target price of $3 per share.
- The lack of significant movement in the company's stock can be attributed to its challenging financial situation, as cash burn has increased recently due to higher research and development expenses. The company still reports extremely low revenues but holds nearly 800 reservations. Virgin Galactic utilized approximately $139 million in the first quarter and expects to use around $135 million in the current quarter. In an environment of rising interest rates and tightening credit policies by banks, external financing sources are becoming increasingly expensive and harder to access.
- The company may not generate positive cash flows for several years, which will likely require additional capital raising in the coming quarters. On the other hand, if it begins taking its first customers to space this summer as anticipated, it may face fewer challenges in securing additional funding.
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Virgin Galactic Stock (SPCE.US), D1 Timeframe. The company's values consistently respect the SMA200 resistance (red line) Source: xStation5