Virgin Galactic Stock Soars After World’s First Tourist Space Flight

On Sunday, the world’s first successful tourist space flight took place aboard a Virgin Galactic spacecraft. Shares in Virgin Galactic, which plans to make space tourism affordable, surged 217% in the two months prior to the event, and rose more than 8% in premarket.

On July 11, a historic event took place – both for the space industry and for Virgin Galactic (SPCE), which was created in 2004 by British billionaire Richard Branson.

A Virgin Galactic Unity spacecraft was launched from the New Mexico launch site with Branson and a professional crew on board. The space plane reached an altitude of about 86 km and a speed of Mach 3 or about 3700 km per hour (this is three times the speed of sound) and then successfully returned to earth.

image source: The Japan Times

The flight is a dream come true for space travel and one of the early successes of the fledgling space tourism industry, in which Virgin Galactic intends to grow.

What was once the subject of science fiction is becoming more realistic, and at the end of this month, the world is expecting another tourist flight into space. The space company Blue Origin will make its first tourist flight into space with founder Jeff Bezos (founder of Amazon (AMZN)) on board.

The third player in the space tourism sector, SpaceX Elon Musk (founder of Tesla (TSLA)), plans to send its first fully civilian crew (no Musk) into orbit in September. A Virgin Galactic spokesman told the Wall Street Journal that Musk also bought a ticket for his flight into space on a Virgin Galactic jet.

What do Virgin Galactic investors need to know?

Virgin Galactic said it plans at least two more test space flights in the coming months before starting regular commercial operations in 2022.

How much are Virgin Galactic space tickets?

Virgin Galactic CEO Michael Colglazier said 600 customers have already booked space travel for about $ 250,000 per ticket.

Virgin founder Branson said that he ultimately aims to bring the price down to $ 40,000 per ticket as the company ramps up service, achieving greater economies of scale.

When commissioned, each Virgin Galactic spacecraft is expected to fly about 36 flights a year. With about six seats per flight, the company’s potential annual revenue could be around $ 54 million.

Analysts expect Virgin Galactic’s sales to reach about $ 3 million in 2021, and they will grow to $ 51 million in 2022, and to $ 555 million by 2025. Today, Branson’s space company is unprofitable, but analysts expect profits and cash flow will become positive by about 2024.

What is the potential of the space tourism market?

Kollazye said Virgin Galactic plans to eventually build a fleet large enough to fly about 400 space flights annually.

The Swiss investment bank UBS has estimated the potential value of the space tourism market at $ 3 billion per year by 2030.

Virgin Galactic shares rose 152.8% year-over-year, but the young company’s shares are very volatile: after a sharp rise in early 2021, there was a similar sharp decline, which was due to the postponement of flight dates and disappointment of investors.

At the same time, two months before the flight on Sunday – Virgin Galactic shares jumped 217%, this growth was also significantly facilitated by the company’s receipt in June of a permit from the Federal Aviation Administration (FAA), which led to an increase in shares by almost 40% in one day.

According to analysts, the main risks for Galactic shares are flight safety risks. An earlier prototype Virgin Galactic rocket crashed during a test flight over the Mojave Desert in California in 2014, killing one pilot and seriously injuring another.

“A fatal accident, while unlikely, could jeopardize the business model,” said Bank of America analyst Ron Epstein.

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