Analysts are bullish on Virgin Galactic stock – here’s what you need to know

Virgin Galactic Holdings Inc (NYSE: SPCE)  stock has been on a steady decline this month, down 35%. The stock fell further on Thursday after a filing from the SEC disclosed Richard Branson had sold $150 million in SPCE shares. In addition, Billionaire SPAC owner Chamath Palihapitiya had also sold his entire $200 million stake in SPCE in March 2021. However, analysts still hold a bullish outlook on SPCE stock with an average 12 month price target sitting at $34 a share (47% upside). Let’s breakdown the long term outlook for Virgin Galactic stock moving into 2021 and beyond.

What are analysts saying about Virgin Galactic stock?

According to MarketBeat data, 6 analysts have listed a Buy rating for SPCE and 6 have listed a Hold. The general sentiment across the board is moderately Bullish, with Analyst Ron Epstein from the Bank of America currently holding a price target of $50 (117% upside potential from its current price). Here are the recent price targets from institutional analysts:
 
  • Sanford C. Bernstein 4/12/2021 – Analyst Douglas Harned initiated coverage at $27 a share with a Market Perform rating. The target suggests an upside of 17% from the current trading price.
  • Truist Securities 3/22/2021 – Analyst Michael Ciarmoli ignited coverage on SPCE stock with a price target at $50 a share. This suggests an upside of 117% from the current trading price
  • Bank of America 3/9/2021 – Analyst Ron Epstein boosted the companies 12 month price target from $35 to $50 a share and maintained a buy rating on the stock. BoA remains bullish on SPCE despite their recent setbacks. 
  • Morgan Stanley 2/1/2021 – Analyst Adam Jonas downgraded the firms rating on SPCE from Overweight to Equal Weight. The 12 month price target from Morgan Stanley is $30 a share (30% upside).

What this means for investors?

In summary, the common trend amongst institutional analysts is a valuation or price target well above the current trading price of $23.06 a share. This is a positive sign for investors looking for entry and a reassurance for longer term shareholders. However, operating within a new industry, we can also conclude analysts are cautious with equal majority listing a Hold rating. 

 

What are the forecasts moving into 2021 and beyond?

Analysts have had a hard time forecasting revenue past 2021 as the company has not been generating consistent revenue. The company made no revenue for this quarter, however this was not a huge shock for investors. Moving forward, the revenue forecasts for Virgin Galactic in 2021 currently stand at $5.09 million annually. This is an increase Year-over-Year north of 2000%. Furthermore, the average revenue forecast for 2022 expects the company to generate $70.38 Million. The revenue increase is set to be a by-product of successful commercialisation in 2021.
 
The company is yet to release stronger guidance in regards to revenue, however we will continue to get a better understanding every quarter closing towards commercialisation. All eyes will be on SPCE in the first quarter earnings results of 2021. This will likely drive a higher level of volatility similar to what we saw in Tesla throughout 2019.

What are the risks associated with SPCE stock?

 
The risk- reward scenario for Virgin Galactic is very unique. SPCE is the only current company trading on the US market that will allow investors to enter the exciting new industry of space travel. The safety risk associated can definitely swing the sentiment of this stock, however I believe the method of travel is not well understood amongst the general public. I recommend having a look at the Virgin Galactic website for information on how they plan to execute commercialisation the space travel industry.
 
As for the volatility of SPCE stock, we have seen a swift decline in the stock price over the past 3 months. For a company not currently generating any revenue and a recent sell-off from large stakeholders, high volatility is to be expected. 
 

The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

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