California-based spaceflight company Virgin Galactic Holdings (SPCE) has postponed the launch of its first commercial flight to the fourth quarter of 2022 from the third quarter. Further, the company will not conduct the second test flight this year, according to a report published by BBC.
The delay is due to a planned upgrade program, targeted to boost the spaceship’s durability, which will commence a month later than planned. Shares of the company closed nearly 17% down on Friday at $20.01.
Virgin Galactic said, “It comes after routine tests revealed a possible reduction in the strength margins of certain materials used on its VMS Eve and VSS Unity craft.”
The CEO of the aerospace company, Michael Colglazier, said, “While this new lab test data has had no impact on the vehicles, our test flight protocols have clearly defined strength margins, and further analysis will assess whether any additional work is required to keep them at or above established levels.”
Virgin Galactic also said it would conduct the next test flight, Unity 23, next summer, with commercial flights starting thereafter. (See Insiders’ Hot Stocks on TipRanks)
Following the announcement, Morgan Stanley (MS) analyst Kristine Liwag reiterated a Sell rating on the stock with a price target of $25 (25% upside potential).
The analyst said, “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.”
Overall, the stock has a Hold consensus rating based on 4 Buys, 4 Holds and 2 Sells. The average Virgin Galactic Holdings price target of $32.20 implies nearly 61% upside potential. Shares have lost 13.8% over the past year.
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