Virgin Galactic's Stock Risks, Valuation Concerns Lead To A Double Downgrade

Shares of Virgin Galactic SPCE are down after getting a double downgrade from an analyst following the rapid rise in the company’s valuation.

The Analyst: Bank of America analyst Ronald J. Epstein downgrades Virgin Galactic from Buy to Underperform and maintains a price target of $41.

The Takeaways: Virgin Galactic shares are up 39% since getting FAA approval to carry passengers to space.

“The premium is already priced into the stock and will dwindle as more commercial space companies go public,” Epstein wrote in a note.

Despite the FAA approval, many risks remain for Virgin Galactic and the entire space sector, Epstein points out. Many of the space stores are volatile and driven by “development-related news.”

“We continue to see Virgin Galactic as a beneficiary of the new commercial space race," he said.

Related Link: Virgin Galactic Could Be Push For Sir Richard Branson To Join Crewed Flight

One area of concern for the analyst is a large number of companies in the space sector going public, which could impact the premium that Virgin Galactic receives.

Virgin Galactic remains on track for its roadmap with three more test flights now the next step before taking passengers to space.

“While the approval brings the company one step closer to carrying passengers into space, SPCE has not announced when it will begin commercial service into the final frontier," Epstein said.

Price Action: Shares of Virgin Galactic are down 6% to $44.40 at publication time.

Disclosure: The author is long shares SPCE.