BofA Initiates Bullish Coverage Of Virgin Galactic: 'Powering Up For Takeoff'

The one-year anniversary of the Virgin Galactic Holdings Inc SPCE IPO is exactly one month away, and one Wall Street analyst has started the countdown for a major liftoff for the stock.

The Analyst: On Monday, Bank of America analyst Ronald Epstein initiated coverage of Virgin Galactic with a Buy rating and $35 price target.

The Thesis: Epstein said Virgin is “powering up for takeoff” and is a unique investment given the lack of pure-play commercial space travel stocks in the market. Virgin is positioned to begin offering services in 2021.

“We believe SPCE’s growth potential is unparalleled vs. our coverage and the current nascent stages of the company provide investors with a unique entry point into the stock,” Epstein wrote in a note.

Related Link: Richard Branson And Virgin Group Launch SPAC

Epstein praised Virgin’s leading market position and experienced management team, but he also said investors should understand the risks associated with investing in a company with such a high-stakes business. At this point, Virgin has only flown its full space mission twice and Epstein said a fatal accident could set the company’s timeline back significantly and negatively impact investor sentiment.

In addition to the headline risk, Virgin has a long way to go before its financials catch up to its $3.8 billion market cap. Epstein is projecting net income losses through at least 2022 and just $8 million in 2021 revenue. However, Epstein said no stock in Bank of America’s coverage universe has anywhere near the long-term growth potential Virgin Galactic does.

Benzinga’s Take: If investors understand that Virgin is an extremely high-risk/high-reward speculative investment, it may be worth taking a gamble given the potential long-term upside for the stock. However, speculation should only represent a very small part of a balanced, long-term investment portfolio.