Virgin Galactic stock dives toward a record low after long-time bull cuts rating and slashes price target by two-thirds

Shares of Virgin Galactic Holdings Inc. fell to an all-time low on Monday after Truist analyst Michael Ciarmoli said there are a handful of reasons why he is no longer optimistic about the space tourism company, but mostly about the postponement of commercial flights. .

In a research note entitled “Not ready for takeoff in 2022,” Ciarmoli said he downgraded his rating to stay, after being on the purchase since March 2021. He also downgraded the rating. its target price at $ 8 from $ 24.

He cited a combination of supply chain delays, weather risk, commercial flight slippage in the first quarter of 2023, lack of operational catalysts and growing interest rates for the downgrade.

SPCE actions,
fell 6.3% in the morning trading, to trade well below the March 14 all-time low of $ 6.79.

The sale came after shares fell 17.7% in the previous two sessions, with the company reporting a larger-than-expected loss on Thursday night, but revenues that were more than triple what was expected. The highlight of the report, however, was that the company said it was postponing its first commercial flight next year, given the limitations of the supply chain and labor force.

Shares have fallen 52.4% so far and have plummeted 89.3% since the record close on February 11, 2021 of $ 59.41. Meanwhile, the S&P 500 SPX index has lost 15.1% this year.

FactSet, MarketWatch

Ciarmoli is concerned that commercial flights may be further delayed by current expectations for the first quarter of 2023.

“We see that the supply chain and labor rigidity may lead to additional slippages in business operations and we believe that the return to flight will not materialize until 2Q23 or later,” Ciarmoli wrote in his research note. “Rising interest rates significantly influence our DCF model, given that most of our valuation lies in our terminal value assumption.”

With Ciarmoli’s downgrade, only 2 of the 12 analysts surveyed by FactSet are bullish on Virgin Galactic shares. Of the rest, three are bassists and seven have the equivalent of retention ratings.

Set of facts

On the bright side, Ciarmoli said the company has made good progress with ticket sales, with the order book likely to support several years of spaceflight. And by the end of next year, he believes there is a chance that Virgin Galactic will send three commercial flights a month.

With the company currently holding around 800 flight bookings, it expects no problem for the company to reach its 1,000 target.

“We estimate that, assuming no further delays in the start of operations, it would take until mid-2026 to work with the company’s backlog.

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