It’s kind of telling when a space stock like Virgin Galactic (NYSE:SPCE), which is supposed to go into space, ends up seeing a double-digit drop in its share prices because it did what it was supposed to do. That’s the kind of strange catch-22 that Virgin Galactic ran into recently and also saw the unexpected stock drop to match.
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SpaceShipTwo, Virgin Galactic’s suborbital vehicle, managed to return to space after a roughly two-year hiatus. The successful return to space paved the way for its return to commercial form, thanks to a research mission the Italian Air Force is looking to stage in June. All of this should have been good news and should have prompted a nice boost in share prices. However, investors are unsure whether this is actually a return to form or a flash in the pan before another protracted stretch of nothing kicks in.
Ronald Epstein, analyst with Bank of America, noted that using one mothership opened up some significant potential risks. However, spirits are certainly high at Virgin Galactic itself; its CEO, Michael Colglazier, noted the crew’s “pure joy” upon their return to Earth and that “post-flight analysis” was already underway for a hopeful potential return soon. Commercial flights and tourism are hoped for in the second half of this year, noted Morgan Stanley analyst Kristine Liwag.
However, Bank of America’s concerns seem to echo in the analyst community. Currently, analyst consensus calls Virgin Galactic a Moderate Sell with five Hold and four Sell ratings. Its average price target of $3.74 per share gives Virgin Galactic stock a 10.49% upside potential.
