Virgin Galactic (SPCE) Stock Crashes 16% on Postponed Commercial Spaceflights, Analyst Lowers PT on Increased Uncertainty and Lack of Clarity

October 15, 2021 8:34 AM EDT
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Price: $16.19 +1.19%

Rating Summary:
    5 Buy, 5 Hold, 3 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 13 | Down: 6 | New: 13
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Virgin Galactic (NYSE: SPCE) stock price is down over 16% in pre-open Friday after the company postponed the start of its commercial space tourism program to fourth quarter 2022.

SPCE will start the work on its spacecraft and carrier aircraft, which will take at least 8 months to complete. The decision to fast track the development work was made after a recent test “flagged a possible reduction in the strength margins of certain materials used to modify specific joints.”

“The re-sequencing of our enhancement period and the Unity 23 flight underscores our safety-first procedures, provides the most efficient path to commercial service, and is the right approach for our business and our customers,” Virgin Galactic CEO Michael Colglazier said in a statement.

BofA analyst Ronald Epstein lowered the price target on the Underperform-rated stock to $20.00 per share from the prior $25.00.

“Commercial operations are still expected by the end of 2022, however, we are uncertain about the company’s ability to forecast such a future and unknown event after the recent failure to call the timing right on a relatively-known short-term event. We are lowering our PO to $20 from $25 on increased uncertainty given the lack of details surrounding an issue that will ultimately delay a mission by roughly one year. The company failed to outline how progress will be tracked and communicated to the public throughout the enhancement program. While there will be little progress toward commercialization within the next year, SPCE also no longer possesses a scarcity premium as the only publicly traded pure-play space company, which we think could also weigh on shares when coupled with the lack of development and technical information coming from the company,” Epstein said in a client note.

On the other hand, Truist analyst Michael Ciarmoli reiterated a Buy rating and a $50.00 per share price target.

“In our view this equates to lost momentum in the space tourism race given the recent successes had by SpaceX (Private) and Blue Origin (Private). Additionally, a general lack of catalysts over the next 12 months could keep the stock range bound. In a worst case scenario we believe SPCE could see signs of a market leading position erode with the stock drifting lower. Our LT DCF model had forecasted only $10M of ticketed revenue in 2022 and accordingly we believe this delay appears to be immaterial to SPCE's longer term intrinsic value,” Ciarmoli wrote in a note sent to clients.

Prior to the after-hours mover lower, the Virgin Galactic stock was up 3.6% YTD.

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