Virgin Spaceship Unity (VSS Unity) touches down
Courtesy Virgin Galactic
Things have been tough for Virgin Galactic Holdings stock lately. A series of flight-testing delays, which pushed out the start of commercial operations, have battered the stock. But shares are up Wednesday morning, after one analyst writes that now is the time to jump in.
Canaccord analyst Ken Herbert launched coverage of Virgin Galactic (ticker: SPCE) Wednesday with a Buy rating at $35 price target.
Herbert calls Virgin Galactic “a leader in the emerging space-tourism market,” adding that after the recent delays, flight activity should pick up culminating with commencement of commercial space service. “As tourist flights gaintraction, we believe the stock should benefit from multiple potential catalysts,” adds the analyst.
One future catalyst is backlog growth—that is people paying hundreds of thousands of dollars to experience weightlessness. The company has held steady at about 600 tourist reservations for a while as Virgin Galactic has worked on testing and commercialization. Herbert believes commercial service, which is, of course, another stock catalyst, should begin in early 2022.
Herbert uses 2030 free cash flow to price the stock. Herbert projects $350 million in free cash flow and discounts the cash back to the present to arrive at his $35 target.
With the new Buy rating, seven of 11 analysts, or 64% of those covering Virgin Galactic, rate the stock at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The Buy-rating ratio has been creeping up lately.
Analysts started downgrading the stock shortly after shares traded north of $60. It was a good call. Flight delays have sent shares down almost 60% from their 52-week high. Shares, however, have recovered recently, rising from $15.50 on May 13 to about $25. The resumption of test flights, and analyst upgrades, are what sent shares higher.
Galactic stock is up 5.3% in morning trading. The S&P 500 and Dow Jones Industrial Average, for comparison, are both about flat.
Write to Al Root at [email protected]
