One of the top players of the space tourism industry, Virgin Galactic (NYSE:SPCE) has had a rough few weeks. The company achieved success with its second test flight that carried its founder, Sir Richard Branson, to the edge of space. But SPCE stock fell after the company sold $500 million of new shares of its stock, and Branson himself sold another $300 million of SPCE stock.
However, all is not lost for the space tourism giant. The company recently reported its Q2 results and has resumed selling tickets.
I have always been bullish on SPCE stock, and I believe that the company is continuing to grow, despite the noise in the industry. It is currently trading close to $27. The stock sometimes become volatile when the company releases news, but the volatility is temporary.
The space tourism market is massive, and Virgin Galactic has laid a foundation to succeed in the sector. With that in mind, let’s dig deeper into the catalysts that will take SPCE stock higher.
A Closer Look at SPCE Stock
The past year has been a roller coaster ride for Virgin Galactic. SPCE stock was trading close to $19 in August 2020 and was stuck in the same range until mid-November. It soared to $25 in November 2020 and rose to $30 in December 2020.
After the company announced that it would conduct a test flight in February, the stock climbed as high as $62. It fell back to $27, however, after the flight was called off due to technical issues. It hit a low of $16 in May 2021, but then rebounded after the successful flight in July.
SPCE stock soared to $52 in July, but subsequently fell again because the company sold $500 million of its stock and Branson unloaded $300 million of his shares. Investors were expecting further guidance about the start of commercial operations, and their wait is finally over.
For Q2, the company reported a loss of 39 cents per share and revenue of $571,000. And the July test flight carried revenue-generating scientific research equipment that will help the company execute its upcoming flights.
Virgin’s selling, general and administrative expenses climbed to $39 million, compared to $26 million during the same quarter a year earlier.
Virgin’s capital expenditures fell to just $1 million last quarter, compared to $6 million during the same quarter in 2020. Its cash position is strong, as it had $552 million of funds as of the end of Q2.
At this stage, the company’s revenue does not matter. However, its strong cash position gives it the ability to invest in capital projects and research.
Ticket Sales and Prices
The company has finally reopened ticket sales, with the prices starting at $450,000 per seat. That is higher than the previous low price of $250,000. In the previous round, 600 people booked seats. For this round, the company has introduced three tiers of pricing: single-seat, a family-and-friends package, and an entire cabin.
The higher ticket prices will put added pressure on the company. However, once its upcoming flights are successful, more travelers will be willing to buy its tickets.
Virgin Galactic’s next spaceflight, a revenue-generating operation that will include members of the Italian Air Force, is scheduled to take place at the end of September. On a second journey, Virgin’s Eve mothership is supposed to carry the spaceplane to a higher altitude. Finally, on a third flight, a complete crew of specialists will visit the vehicle and confirm that everything is going as planned.
The commercial service is supposed to begin in the third quarter of 2022. If all goes as planned, there is no stopping Virgin Galactic.
The Bottom Line
Virgin Galactic reported weaker-than-expected Q2 results, but the company is moving in the right direction. It has a first-mover advantage and is all set to start commercial operations next year.
Virgin has a well-laid-out plan and has already carried out a few successful flights. At this stage, its earnings do not matter very much. Virgin Galactic just has to get the technical aspects right and be successful on its next three flights to soar higher.
A lot depends on Virgin’s next flight in September. The success of this flight will tell a lot about the company, and if the endeavor is successful, the Italian Air Force could carry out more flights with Virgin.
SPCE stock is a buy in this dip, and I believe it will rise to new highs right before the September flight.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.