By Virgin Galactic Holdings Inc. saw a 4% rise in premarket trade on Wednesday after Truist Securities upgraded the stock from sell to hold and raised its price target from $1 to $3.
According to Truist Securities analyst Michael Ciarmoli, the upgrade was made based on the company’s decision to halt commercial operations by mid-2024, allowing them to allocate capital towards the development of the Delta fleet. While this move is seen as prudent, it eliminates the possibility of significant short-term catalysts for both upside and downside.
In November, Virgin Galactic unveiled its growth strategy for the near future, providing details on its new Delta Class spacecraft. The spacecraft is scheduled for flight tests in 2025 and plans to enter service in 2026. Truist’s Ciarmoli expressed skepticism about the company’s ability to achieve this timeline and budget, but expects limited developments in 2024.
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Virgin Galactic’s Financial Position
Virgin Galactic, the space-tourism company, has reassured investors that it has no immediate liquidity concerns. According to Ciarmoli, the company had approximately $1.1 billion in cash and marketable securities as of September 30, 2023. This strong financial position is expected to be sufficient to fund the company’s near-term plans without the need for additional capital raises this year.
Analyst Ratings
A survey of 12 analysts conducted by FactSet reveals mixed sentiments towards Virgin Galactic. Two analysts have a buy rating, five have a hold rating, and five have an underweight or sell rating for the company.
Potential Investment Opportunity
Justus Parmar, CEO of Fortuna Investments, a venture-capital and advisory company with a focus on space investments, believes that Virgin Galactic deserves attention. Parmar highlights the company’s market capitalization of $1.06 billion and its substantial cash balance. However, he expresses surprise at the market’s current undervaluation of the company. Parmar wonders if this perception will change over the course of the year.
Virgin Galactic’s Future Plans
Virgin Galactic faced a setback when founder Sir Richard Branson announced that there would be no further investment in the company. Branson expressed confidence that Virgin Galactic has enough funds to pursue its objectives independently, asserting that it should be self-sufficient.
Financial Performance
Despite recent challenges, Virgin Galactic reported positive developments in its third-quarter results. The company narrowed its quarterly loss and saw its revenue more than double compared to the same period the previous year. The third-quarter revenue amounted to $1.73 million, up from $767,000 in the prior year’s quarter.
Stock Performance
Virgin Galactic’s stock has experienced a significant decline, with a 46.9% decrease over the past 52 weeks. In contrast, the S&P 500 index achieved a gain of 21.4% over the same period.
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