Why This Virgin Galactic Analyst Remains Bearish

Although Virgin Galactic Holdings Inc SPCE is closer to achieving space tourism, the prospects are already reflected in its stock valuation, according to BofA Securities.

The Virgin Galactic Analyst: Ronald Epstein maintained an Underperform rating on Virgin Galactic with a $41 price target. 

The Virgin Galactic Takeaways: The company has completed the 22nd test flight of VSS Unity and the first test flight with a full crew in the cabin, Epstein said in the note.

“Yesterday’s flight brings the company one step closer to carrying paying commercial passengers, whom the FAA recognizes as “spaceflight participants,” into space,” the analyst wrote.

“SPCE has not announced when it will begin commercial service into the final frontier. We would expect this in the first half of next year,” Epstein noted.

While noting that the risk reward seems “more skewed to the downside,” he added the valuation of Virgin Galactic’s stock “more than reflects the underlying financial fundamentals and gives the company a more than healthy multiple premium for potential growth.

“The company is still several years from generating positive cash flow, per our financial projections free cash flow turns positive only in 2025,” Epstein further wrote.

SPCE Price Action: Shares of Virgin Galactic lost 17.3% Monday, closing at $40.69. 

Photo: a Virgin Galactic SpaceShip.