Virgin Galactic (NYSE:SPCE) Stock Doubles From Lows: What Next?
5:24 am Friday, June 04th, 2021
The space flight company Virgin Galactic (NYSE:SPCE) has seen its stock come into sharp focus in recent days after the company completed its test flight successfully.
The stock has had a rollercoaster ride this year so far but the development of the latest test flight has managed to unleash a wave of new optimism into the stock. Space flight is now a hot sector due to the involvement of famed entrepreneurs like Elon Musk and Jeff Bezos. Virgin Galactic, owned by Richard Branson, has also caught the fancy of investors. However, in this situation, it is important for investors to take a closer look before making any move.
Morgan Stanley has projected that by 2040, the space flight industry could generate as much as $1 trillion and hence, the interest in the Virgin Galactic stock is understandable.
While the rewards can be enormous, there are enormous risks associated with the sector and for a pure-play space flight company, it can be particularly problematic. That is something that investors need to keep in mind when considering an investment. On the other hand, the company’s relationship with the owner Richard Branson is also an important thing to be considered.
Over the course of the past year, Branson has sold as much as $650 million worth of Virgin Galactic stock in order to finance his other businesses, which were struggling due to the pandemic. However, in Branson’s defense, it should be noted that his airline did not get any financial package from the government and that may have been a temporary measure from the billionaire.
That said, if other businesses continue to struggle then such share sales might continue and that presents a risk. Lastly, the company’s research and development expenses stood at only $34 million in the most recent quarter, as opposed to $36 million in the prior-year period. That is only a marginal rise. On the other hand, SG&A expenses (selling, general and administrative) soared to $45 million from $27 million. That is a red flag since research and development are the pillars of any company in this sector. At this point, investors might do well to avoid the Virgin Galactic stock.
