Modest Virgin Galactic (SPCE) Correction 'Overdue' - Morgan Stanley

While currently not having an impact, in a morning research report to clients on high-flyer Virgin Galactic (NYSE: SPCE), Morgan Stanley analyst Adam Jonas - one of the original bulls on the stock - said a "modest correction is overdue, and frankly, healthy, in our opinion."

He highlighted:

1. The stock is up nearly 6x in 12 weeks. Why not raise capital now? "Some investors we have spoken with have advocated for a capital raise; this in our opinion is clearly a logical question for the 4Q call..."
2. What’s in the price at nearly $40/share? "At last night’s close, close, the stock trades at a P/Sales of roughly 8x our 2030 revenue estimate and approximately 17x our 2030 EBITDA forecast... the stock is fully discounting a highly successful space tourism business at scale,a moderately successful space tourism business with early credit for the hypersonic opportunity..."
3. What’s the event path going forward? "The company reports 4Q results this Tuesday,February 25th after the close followed by an analyst conference call. We suspect a significant portion of the discussion and Qand A will focus on upcoming testing/certification milestones for its Spaceship VSS Unity..."

The firm reiterated an Overweight rating and $22.00 price target on SPCE,

For an analyst ratings summary and ratings history on Virgin Galactic click here. For more ratings news on Virgin Galactic click here.

Shares of Virgin Galactic closed at $37.35 yesterday.

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