Virgin Galactic soared this week ahead of its next test flight.
The stock took off on Thursday after the company announced a spaceflight test targeted for Saturday. The company aims for commercial space travel next year.
But, for Gradient Investments President Michael Binger, the stock still looks too risky to jump in.
“This is clearly a concept stock. Analysts aren’t forecasting meaningful revenues for another two years out and earnings, I mean, that’s three to four to five years out,” Binger told CNBC’s “Trading Nation” on Thursday.
Virgin is expected to report a net loss of $1.36 a share in fiscal 2021 ending December, wider than the $1.25 loss a year earlier. That should narrow to a loss of 78 cents a share in 2022, according to FactSet estimates.
Even this weekend’s test flight, the catalyst for recent gains, may not come to pass, warns Binger.
“There’s a lot of optimism around there, but in my opinion, that flight taking off is not a given at this point here. So, you know, I get it, space tourism, it’s going to be a big thing down the road someday, but for me the stock is just too speculative right now to own. So we would avoid it,” Binger said.
Virgin Galactic CEO Michael Colglazier said in a statement Thursday that a “detailed inspection” of the mothership Eve had cleared it for flight. Investors had worried that the next test would be delayed.
Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors, says the market appetite has also turned against stocks like Virgin.
“It had its stumbles where they disclosed that they were having some troubles with their flight controls, electromagnetic signal issues, round about the time that the market started really turning away from these high-growth, high-risk stocks into really growth at a reasonable price and this does not fit that characteristic,” Sanchez said during the same interview.
Growth stocks have taken a hit in the past month as fears of higher inflation soured sentiment around the trade. The IVW growth ETF, which does not hold Virgin but can be used as a proxy for risk appetite, has fallen 2% in May.
“[Virgin] has real potential, but we still have to see all of the components that make that potential a reality. So we’re really early in this stock. I think that it’s still quite risky here, and the general market environment just isn’t favoring these kinds of speculative plays,” said Sanchez.
Virgin Galactic is up 27% this week but has dropped nearly 70% from a February peak.
