Virgin Galactic (NYSE: SPCE) stock surged in pre-market trading on 16 June following a major announcement from the space tourism firm the day before. As I write, my data provider shows me the share price is due to start the day up 40%, which would see it rise from $4 to well above $5.
Yet this would still leave the stock down around 89% in a little under two years.
So, is now the time for investors to get on board? Let’s explore.
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All systems go
To recap, Virgin Galactic was founded by British businessman Richard Branson in 2004. Its aim is to commercialise sub-orbital trips to space, which finally looks to be happening.
The company announced that its first commercial space flight, Galactic 01, is planned to fly between June 27 and 30 June. The second, Galactic 02, will follow in early August, with monthly trips expected thereafter.
Galactic 01 is a scientific research mission, which will carry three crew members from the Italian Air Force and the National Research Council of Italy to conduct microgravity research.
Despite this exciting development, the firm’s current revenue is negligible compared to its $1.5bn market cap.
A risky stock
I should disclose that I was once a Virgin Galactic shareholder, but I sold the stock when it skyrocketed above $50 during the meme stock craze of 2021.
If I were to invest again, I’d need to be mindful of the risks here. The first is that after nearly 20 years of test flights, the company is only just launching actual commercial operations. It has a long history of delays and technical problems.
Plus, there was a fatal accident in 2014 that claimed the life of a Virgin Galactic test pilot in the Mojave Desert. It was found that this crash was caused by a co-pilot error.
Even though the company learnt from this tragedy and built in safety features to prevent it happening again, risk remains.
Competition
The company also faces formidable competition in the shape of SpaceX and Blue Origin. These are the space exploration companies set up by Elon Musk and Jeff Bezos, respectively.
In 2021, Star Trek actor William Shatner completed a sub-orbital flight with Jeff Bezos aboard Blue Origin’s capsule. Like Branson, both Musk and Bezos are visionary entrepreneurs, but they have vast ambitions stretching well beyond such sub-orbital flights.
SpaceX, for example, has already chartered its first private astronaut flight to the International Space Station (ISS). At $55m per person for the rocket ride and accommodation, with meals included, the ISS is the solar system’s most expensive tourist destination.
That makes Virgin Galactic’s $450,000 per seat for five minutes of weightlessness in space look like a bargain!
My move now
Celebrities including Justin Bieber, Leonardo DiCaprio, Tom Hanks, Lady Gaga, Angelina Jolie, and even Elon Musk have all reportedly bought tickets. They could bring a lot of attention to Virgin Galactic and the stock.
I reserve a small part of my portfolio for speculative holdings, and I’d definitely place this in that category. I’m contemplating buying a few shares again, now that commercial space flights are due for lift-off.
But this remains a high-risk stock, so I’ll certainly be keeping my position small.
