Virgin Galactic stock falls to a record low after the longtime bull cut its rating and cut its price target by two-thirds

Virgin Galactic Holdings Inc. shares fell to a record low on Monday after Truist analyst Michael Ciarmoli said there were a handful of reasons he was no longer optimistic about the space tourism company, but mostly because of the postponement of commercial flights.

In a research note titled “Not Ready to Launch in 2022,” Ciarmoli said he downgraded his rating to Hold after being in Buy since March 2021. He also lowered his price target to $8 from $24.

He cited a combination of supply chain delays, timing risk, commercial flights slipping into the first quarter of 2023, a lack of operational catalysts and rising interest rates for the downgrade.

The stock SPCE,
Shed 4.0% in premarket trading, putting it on track to open below March 14’s record low of $6.79.

The sell-off comes after the stock fell 17.7% over the past two sessions, with the company reporting a bigger-than-expected loss late Thursday but earnings more than triple expected. But the highlight of the report was that the company said it had delayed its first commercial flight until next year due to supply chain and labor constraints.

The stock is down 49.2% year-to-date through Friday and closed 88.6% below the Feb. 11, 2021 record close of $59.41. Meanwhile, the S&P 500 Index SPX has lost 13.5% this year.

FactSet, MarketWatch

Ciarmoli worries commercial flights could be delayed even longer than current expectations for the first quarter of 2023.

“We see supply chain and labor shortages potentially causing additional delays in commercial operations and believe a return to flight operations may not materialize until Q2 2023 or later,” Ciarmoli wrote in his research note. “Rising interest rates put a significant strain on our DCF model as the majority of our valuation is based on our terminal value assumption.”

With Ciarmoli’s downgrade, only 2 out of 12 analysts polled by FactSet are bullish on Virgin Galactic stock. Of the remainder, three are bearish and seven have the equivalent of hold ratings.


fact set

On the plus side, Ciarmoli said the company has made good progress on ticket sales, with the backlog likely to support several years of spaceflight. And he believes Virgin Galactic has the potential to air three commercial flights a month by the end of next year.

Given that the company currently has an estimated 800 reservations for flights, he doesn’t expect any problems if the company hits its goal of 1,000.

“We estimate that it would take until around mid-2026 to clear the company’s backlog, assuming there are no further delays in starting operations. Virgin Galactic stock falls to a record low after the longtime bull cut its rating and cut its price target by two-thirds

Brian Lowry

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