Why Virgin Galactic Stock Tumbled Recently

During open trading today, Virgin Galactic stock ($SPCE) took an enormous hit. Dropping by around 11.5%, it fell by $4.37. Though after-hours trading has the stock crawling back up, the losses are still substantial. 

Because of Galactic’s newfound competition in the form of Boeing, Holicity, and Rocket Lab, investors are no longer confined to the company. 

Similarly, shares took a plunge upon the announcement that Galactic’s newest test flight, as well as the flight of founder Richard Branson, had been delayed. Because the newfound electromagnetic interference issues could cause an engine malfunction, the flight was pushed back until May, at the earliest. 

Alongside that, Galactic’s new quarter earnings showed a net loss of $74M, no revenue, and a remaining cash balance of $666M, although it has been speculated that once up and running, they will be earning $1.5M per flight. However, they produced an EPS of -$0.31, which sent the market into a selling frenzy. 

Although the delays have sent the stock tumbling downwards, it may not be the worst thing in the world. Nothing in the recent news indicated that Virgin Galactic would fail in the future, but the stock has dropped significantly over the past few days. 

However, their most enormous problem comes from SpaceX, which is considered to become the primary source of space travel shortly. Galactic’s IPO will be dwarfed by SpaceX when it releases onto the market, something that could pose significant challenges in the future for their viability as a primary space travel company. 

COVID-19 restrictions have made operations difficult, with virus-caused delays setting procedures back by multiple months. 

As they continue to develop both their product and executive team, their long-term profitability has not yet been compromised. Investors predict strong revenue growth in Q1 and the entirety of 2021, although revenue may not be the essential factor. For investors, even the confirmation of a successful test run could cause enough speculation to boost the stock significantly, solely based on the hopes of what the company could do in the future.  

Moving into the near future, space tourism could become a large market. Investors may find themselves buying shares of companies that make them millions or eventually sputter out in the evolution stage.