Shares of Virgin Galactic (SPCE) have been going up in a nearly straight line since December after the space tourism company made its public debut back in October. While Morgan Stanley analyst Adam Jonas is "very constructive" on the story, he questions whether the gain in the shares has been “too much too soon,” and says the share price could use "a breather."
STOCK COULD USE 'A BREATHER': In a research note to investors published on Tuesday, Morgan Stanley analyst Adam Jones argued that Virgin Galactic's share price could use "a breather" after roughly quadrupling since early December. While the analyst remains "very constructive" on Virgin Galactic's story, he noted that the recent stock gains appear "to be driven by forces beyond fundamental factors." Nonetheless, Jonas maintained an Overweight rating on the shares, with a $22 price target.
NO NEAR-TERM COMPETITION: Back in January, Credit Suisse analyst Robert Spingarn had told investors that he remained bullish on Virgin Galactic given the near-term monopoly the company offers in commercial space tourism where public investment opportunities are scarce. The analyst added that he viewed this as a classic tech-driven high demand, low supply story with high barriers to entry.
The scarcity of commercial space tourism offerings enables sticky pricing with low relative operating costs, especially now that much of the infrastructure is bought and paid for, he contended. With no near-term competition, Spingarn believes growth should be fueled by expanding supply. He has an Outperform rating on the shares.
PRICE ACTION: In morning trading, shares of Virgin Galactic have jumped another 11% to $33.67. The stock is up almost 200% year to date and over 350% since December.
Virgin Galactic
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