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Virgin Galactic Stock Plunges After Company Delays Spaceflight Tests to 2022

Virgin Galactic
  • The space tourism company is beginning a refurbishment process on its vehicles that is expected to take eight to 10 months, with completion anticipated between June and August.
  • Bank of America lowered its price target for Virgin Galactic to $20 a share from $25 per share and maintained its underperform rating on the stock, citing "increased uncertainty and lack of clarity" from the company around the change.

Virgin Galactic's stock plunged Friday after the company said it would delay any spaceflights to next year as it refurbishes its vehicles.

While Virgin Galactic hoped to fly its next spaceflight in September, the space tourism venture changed its plan and decided to begin the "enhancement" period on its VSS Unity spacecraft and VMS Eve carrier aircraft before flying again. The refurbishment process is expected to take eight to 10 months, and the company anticipates completing it between June and August. Revamping the vehicles would effectively delay Virgin's next spaceflight to mid-2022 at the earliest.

Virgin Galactic had three more spaceflights scheduled: Unity 23, Unity 24 and Unity 25. Now, its previously announced timelines are undetermined until it completes refurbishment. The company said it aims to start commercial service, which the Unity 25 mission was expected to represent, in the fourth quarter of 2022.

Shares of Virgin Galactic fell 16.8% in trading to close at $20.01. The stock erased its gains for 2021 and turned negative year to date.

Wall Street reacts

Bank of America lowered its price target for Virgin Galactic to $20 a share from $25 per share and maintained its underperform rating on the stock. It cited "increased uncertainty and lack of clarity" from the company around the change.

"We are uncertain about the company's ability to forecast such a future and unknown event after the recent failure to call the timing right on a relatively-known short-term event," Bank of America analyst Ron Epstein wrote in note to clients. "The company failed to outline how progress will be tracked and communicated to the public throughout the enhancement program."

Canaccord Genuity kept its $48 per share price target and buy rating. It told investors that the firm does not see Virgin Galactic's changed schedule "to be significant" in affecting the company's "long time-horizon space tourism plans."

"We continue to view the enhancement period, which will raise VSS Unity's flight readiness to every 4-5 weeks and VMS Eve's endurance to ~100 flights, to be important to boosting customer launch cadence," Canaccord Genuity analyst Austin Moeller wrote in a note.

Likewise, Truist maintained its buy rating and $50 price target, but told investors that Virgin Galactic's adjusted schedule "equates to lost momentum in the space tourism race."

"In a worst case scenario we believe SPCE could see signs of a market leading position erode with the stock drifting lower," Truist analyst Michael Ciarmoli wrote in a note. "We believe this delay appears to be immaterial to SPCE's longer term intrinsic value."

Jefferies also stuck to its buy rating and $33 per share price target, describing Virgin Galactic's update as a "modest delay to commercial service."

"We continue to believe that commercial space tourism will be a flourishing industry, unlocking profitability and cash flow for Virgin Galactic," Jefferies analyst Greg Konrad wrote in a note to investors.

Morgan Stanley reiterated its underweight rating and $25 price target, saying that "the schedule slippage and potential technical issues highlight the inherent risks around flight testing.

"We view it positively that the company is investing in increasing its long-term space flight capacity. However, these investments take time – sometimes more than anticipated," Morgan Stanley analyst Kristine Liwag wrote in a note.

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