Why Virgin Galactic Stock broke today


What happened

Wednesday, Galactic Virgo (NYSE: SPCE) the stock rebounded after Tuesday’s sell-off. Because the stock price really took off after 2 p.m. EDT, it’s likely that most of those gains (3.8% at the closing bell) came in response to the Federal Reserve’s announcement that it plans to keep its benchmark federal funds interest rate near 0% until 2023. – a policy that will limit the degree to which bonds will compete with stocks for investor attention. The announcement left investors generally excited about the outlook for the stock market.

But there was also good company-specific news for Virgin Galactic.

Image source: Virgin Galactic.

So what

Specifically, StreetInsider.com reported that after the stock market closed on Tuesday, analysts at Truist Securities (formerly BB&T Securities, prior to BB&T’s merger with SunTrust), began hedging Virgin Galactic shares with a rating of d. purchase and a target price of $ 50.

As “one of the early entrants to the market, with proprietary technology, vertically integrated operations” (such as an integrated spacecraft construction operation – The Spaceship Company) and “plans for a focused experience. with the consumer leveraging the Virgin brand, ”the Truist analysts predict that by 2030, Virgin Galactic will control 50% of the space tourism market.

Now what

So far, so good. After all, the space tourism market doesn’t really exist yet, and only two companies have made clear their intention to create one: Virgin Galactic and Jeff Bezos’ Blue Origin. In a situation like this, estimating that these two competitors could split the market 50-50 makes perfect sense, especially if you give companies almost a decade to fix the issues and start sending tourists into space.

In the shorter term, Truist voiced the opinion of some Virgin Galactic skeptics: The fact that the company has postponed test flight operations until May 2021 likely means that it will not be able to start flying commercially this year. In Truist’s opinion, a commercial start-up is more “likely … in early 2022”.

In the short term, that sounds more like a bearish argument to me – but that doesn’t stop Truist from evaluating Virgin Galactic stock as a buy.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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