Shares of Virgin Galactic (SPCE) are under pressure on Monday after the company filed to sell up to $500M in common stock. Over the weekend, the commercial spaceflight company completed a successful test flight with founder Sir Richard Branson, ahead of Blue Origin's scheduled flight later this month. The latter is owned by Amazon's (AMZN) founder Jeff Bezos. Commenting on Virgin Galactic's first fully crewed test flight, Canaccord analyst Ken Herbert said Richard Branson "has effectively won the commercial tourism space race."
FIRST FULLY CREWED SPACEFLIGHT: Over the weekend, Virgin Galactic announced that VSS Unity "successfully" reached space, completing the company's fourth rocket-powered spaceflight. This flight was the 22nd test flight of VSS Unity and the first test flight with a full crew in the cabin, including the company's founder, Sir Richard Branson. The crew fulfilled a number of test objectives related to the cabin and customer experience, including evaluating the commercial customer cabin, the views of Earth from space, the conditions for conducting research and the effectiveness of the five-day pre-flight training program at Spaceport America. VSS Unity achieved a speed of Mach 3 after being released from the mothership, VMS Eve. The vehicle reached space, at an altitude of 53.5 miles, before gliding smoothly to a runway landing at Spaceport America.
In becoming a certified astronaut, Sir Richard Branson "has effectively won the commercial tourism space race," Canaccord Genuity analyst Ken Herbert told investors in a research note. Rival Jeff Bezos, founder of Blue Origin, is not due to take his first ride to space on the New Shepard space capsule until July 20, he added. The analyst noted, however, that while Branson promised a major announcement about bringing more people to space following his flight, there was ultimately no news about reopening ticket sales. Herbert continues to see several upcoming catalysts for Virgin Galactic shares, including the upcoming Italian Air Force flight, the completion of VSS Unity and VMS Eve maintenance work in the fourth quarter, and a future announcement regarding revised ticket prices above the previous $250,000 level. He kept a Buy rating on Virgin Galactic with a $35 price target on the shares.
Still bearish on the name, Bank of America analyst Ronald Epstein kept an Underperform rating on Virgin Galactic with a $41 price target following Sunday's successful test flight of VSS Unity, the first test flight with a full crew in the cabin, including the company's founder, Sir Richard Branson. Virgin Galactic has not announced when it will begin commercial service into the final frontier, added the analyst, who does not expect this in the first half of next year. While Epstein acknowledges that Sunday's flight demonstrates that the company is on track to complete another two suborbital test flights by fall 2021, he believes Virgin Galactic's progress toward space tourism is already reflected in the stock's valuation. The company is still several years from generating positive cash flow, and the stock's risk/reward is "more skewed to the downside," the analyst added.
STOCK SALE: Virgin Galactic has entered into a distribution agency agreement with Credit Suisse, Morgan Stanley and Goldman Sachs, dated July 12, relating to the sale of common stock. The company may offer and sell shares of common stock having an aggregate offering price of up to $500M from time to time.
PRICE ACTION: In Monday morning trading, shares of Virgin Galactic have dropped over 12% to $43.23.
Virgin Galactic
-5.66 (-11.49%)
Amazon.com
-2.65 (-0.07%)