Virgin Galactic shares 14% lower in pre-market after report

1:13 PM August 5, 2022

Yesterday Virgin Galactic, a company intending to provide services in the sub-orbital space tourism sector, presented its report for the second quarter of the year. The subsequent postponement of the first tourist flight to Q2 2023 clearly surprised investors negatively:

EPS: -$0.43 vs -$0.37 forecasts

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Revenue: $357k vs $89.8k forecasts

Net loss: $111 million vs. $94 million in Q2 2021

Research and development costs: $62 million vs. $35 million in Q2 2021

Net expenses: $87 million vs. $65 million in Q2 2021

  • Virgin Galactic reported a $0.07 higher loss per share than analysts' forecasts. Revenues turned out to be nearly 3 times higher than analysts' assumptions - but still remain small and do not cover the huge expenses the company incurs. The net loss deepened against the Q2 2021 result. The company is incurring increasing expenses due to strategic spending on research and infrastructure development;
  • The company postponed the date of its first tourist flight for the third time, which was received very negatively by the market. Previously, management pointed to Q4 2022, then Q1 2023. Subsequent postponements increase the risk due to rising expenses and the company's drag on revenue. However, Virgin Galactic still has nearly $1.1 billion in reserves, which if the company maintains its spending pace - should be enough for several years of strong growth;
  • Confidence in the company's management declined despite the formation of a number of strategic partnerships with, among others, aerospace industry leader Boeing (Aurora Flight Sciences) and luxury travel agency Virtuoso. Quotations were not helped by news that construction had begun on a factory in Phoenix, Arizona, which is expected to be operational by the end of next year and will serve as a site for Delta-class ships. Nor did news of the planned delivery of the first Aurora ship by 2025 or the purchase of land in the state of New Mexico, where the 'Future Astronaut Campus', a complex of facilities and hotels owned by Virgin Galactic, is eventually to be located, help;
  • Until the company launches into space with its first customers and confirms its ability to earn real profits from its still futuristic business, the valuation of the stock will continue to be weighed down by 'cash burn' and potential problems with scaling the business in an environment of rising capital costs, staff shortages and supply chain problems. Today, the market is clearly pricing in an uncertain future for the company, with the stock losing in the face of declining risk sentiment.

Virgin Galactic (SPCE.US) stock chart, D1 interval. From a technical point of view, the company's shares have been moving in an uptrend since the first half of May. The demand side is currently testing the resistance regions defined by the 100-day exponential moving average (purple curve). The nearest support remains the EMA 50 (blue curve). Stock probalby will open below 7 USD levels. Source: xStation 5

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