Virgin Galactic: Buy, Sell, or Hold?

 Virgin Galactic: Buy, Sell or Hold?

Space tourism company Virgin Galactic (NYSE: SPCE ) has not participated in the broader market launch since January. Stocks are roughly flat in 2023, even as the S&P 500 soars 17%. It's clear the company is in the early stages of expanding its commercial program, where people can buy seats on upcoming flight missions — and there's still a lot of work ahead. Should investors be considering the stock now? Or is it better to avoid it? This fool broke down the numbers to illustrate a clear path forward for investors. Here's what you need to know.

Commercial missions have begun and the revenue is trickling in

Virgin Galactic is trying to capture the space tourism industry. For about $450,000, you can buy a ticket to one of the company's air missions. Virgin Galactic uses a mother ship to carry a passenger ship to a high altitude and then releases it. The passenger ship then uses a rocket charge to reach its maximum altitude before gliding back to Earth's surface. It's a suborbital experience that creates a brief period of zero gravity.

Design and testing took several years, but the company finally began conducting commercial missions. That brought in roughly $2 million in revenue in the second quarter of this year. The company burned through about $135 million in cash during the quarter, so the revenue represents a drop in comparison to what it takes to run the business profitably.

Still, it's an important step. Just as the manufacturer loses less money as volume increases, Virgin Galactic should eventually generate profits as the business flies enough missions to begin to offset the company's fixed operating costs.

But waiting for that day can be hard

The tricky question for investors is whether to wait for that day. Investors could wait a while. Management expected just $2 million in sales for the back half of the year. Meanwhile, monetary losses will continue; Free cash flow for the third and fourth quarters is expected to be between minus $120 million and minus $130 million. Virgin Galactic already has $417 million in debt and is constantly issuing new shares to keep fresh money to fund the business. This is fine for the company, but investors are repeatedly diluted. In other words, their existing shares lose value as the new shares increase the number of shares outstanding. How many shares will there be before the company raises money?

The necessary missionary activity is years awayUnfortunately, the company is still far from routine flight missions. The current plan is about one mission per month until more spacecraft can be built, tested and fielded. That would come with the company's Delta class, the next generation of its spacecraft.

Hypothetically, it would generate nearly $3 million in revenue per flight and could handle weekly missions. However, according to management, these spacecraft will not be launched until 2026, assuming there are no delays.So what's the verdict? The stock already has a market cap of $1.3 billion, despite generating virtually zero revenue -- so in my opinion, investors should probably avoid or sell the stock altogether if they hold the stock.

In the meantime, investors should look for continued development of Delta's fleet and better visibility into how much more dilution management could do to fund its operations over the next few years. Once that happens, it would be wise to reconsider and look again.When our team of analysts has a stock tip, it can pay to listen. After all, the newsletter they've been running for over a decade, the Motley Fool Stock Advisor, has tripled the market.*

They've just revealed what they believe are the ten best stocks for investors to buy right now... and Virgin Galactic isn't one of them! That's right - he thinks these 10 stocks are an even better buy.Justin Pope has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Virgin Galactic, the innovative space travel company founded by Sir Richard Branson, has captured the imagination of investors and space enthusiasts alike. The company has gained considerable attention for its pioneering vision to make commercial space travel a reality. But with any investment, the question arises: Is now the right time to buy, sell or hold Virgin Galactic stock? In this article, we will provide an in-depth analysis of the company's current state, recent developments and key factors that could affect its future. Let's dive into the details.

Virgin Galactic progress and recent milestones

Virgin Galactic has made remarkable strides in making space tourism accessible to the public. With successful test flights and a growing booking list, the company appears to be on the verge of a major breakthrough. The recent launch of Unity 22, which carried Sir Richard Branson to the edge of space, attracted global attention and showed the potential of Virgin Galactic's technology.

Market Sentiment and Investor Considerations

The market sentiment surrounding Virgin Galactic was both optimistic and cautious. The company's ambitious goals have attracted a large number of fans, leading to a sharp increase in the value of the stock during moments of positive news. However, the stock has also experienced volatility caused by factors such as regulatory concerns, technical issues and competition from other space businesses. The commercial space industry is evolving rapidly, with several companies vying for market share. SpaceX, Blue Origin and other emerging players compete in various segments of the space industry, including satellite launches, space tourism and Mars exploration. This competition adds complexity to Virgin Galactic's path forward.

Future growth potential and risks

Virgin Galactic's growth potential is undeniable, but it's important to recognize the risks involved. Regulatory hurdles, technical setbacks and market fluctuations are all factors that could affect the company's progress. Additionally, the timeline for achieving consistent and profitable space tourism operations remains uncertain.

The decision to buy, sell or hold Virgin Galactic stock depends on your investment strategy, risk tolerance and long-term outlook. The company's revolutionary achievements, enthusiastic customer interest and the vision of its charismatic founder are convincing factors. However, the inherent risks and competitive environment should not be overlooked. It is very important to stay informed of Virgin Galactic's developments and closely monitor market trends.

In short, Virgin Galactic's journey is still evolving and the decision to invest should be based on a thorough understanding of the company's progress, risks and the wider space industry environment. Whether you decide to buy, sell or hold, keeping a close eye on this exciting space venture is essential for any informed investor. Disclaimer: This article is for informational purposes only and should not be considered financial advice. Always do thorough research and consult with a qualified financial advisor before making an investment decision.