Virgin Galactic Holdings Inc. has unveiled its growth strategy for the near future, detailing the launch of its new Delta Class spacecraft in its third-quarter report. The Delta spacecraft is set to undergo flight tests in 2025, with full service expected to begin in 2026. This new spacecraft will offer six seats for paying passengers, a notable increase from the current four-seat Unity spacecraft. In addition, the Delta Class will have the capability to conduct up to eight spaceflights per month, a significant improvement over Unity’s one spaceflight per month.
According to Virgin Galactic, this development will substantially boost their monthly revenue per spacecraft, increasing it from a maximum of $2.4 million to an impressive $28.8 million.
While the company’s stock soared and it generated nearly $2 million in revenue from space tourism, Truist Securities analyst Michael Ciarmoli indicated that he foresees faster revenue generation for Virgin Galactic, albeit not in the immediate future.
During the conference call discussing the third-quarter results, Virgin Galactic revealed its plan to carry out two more missions using the Unity spacecraft before temporarily suspending flights in mid-2024 to focus on the development of the Delta spacecraft.
Despite these developments, Truist Securities has maintained its sell rating and $1 price target for Virgin Galactic, citing concerns about potential cash burn and execution risks, particularly related to limitations with the Mothership.
Virgin Galactic Reports Strong Financial Position and Expansion Plans
Virgin Galactic, a leader in the space travel industry, has announced that it is well-capitalized and poised for growth. As of the end of the third quarter, the company holds an impressive $1.1 billion in cash and marketable securities. This strong financial position allows Virgin Galactic to bring its first two Delta spacecraft into service and achieve positive cash flow by 2026.
T.D. Cowen analyst Oliver Chen is optimistic about Virgin Galactic’s future prospects. He believes that the company is on track to achieve positive free cash flow in FY26, with the potential to generate annual revenue between $518-691 million. This projection is based on the assumption that each Delta Class spaceship will fly 6 passengers 8 times per month. Revenue per flight will vary depending on the percentage of seats sold to private astronauts at $450,000 each compared to seats sold for research projects at $600,000 each.
Chen also notes that management is confident that the liquidity of $1.1 billion from the third quarter will be sufficient to sustain a weekly flying cadence by FY26. Despite adjusting their price target from $7 to $2.50, T.D. Cowen maintains an outperform rating for Virgin Galactic.
FactSet’s survey of 12 analysts reveals a mixed sentiment towards Virgin Galactic’s stock. Two analysts have a buy rating, five have a hold rating, and five have an underweight or sell rating. Nonetheless, Virgin Galactic’s stock saw a significant increase of 18.3% on Thursday. Although the stock has experienced a 46.9% decline in value in 2023, it is important to note that the S&P 500 index has gained 13.3% during the same period.
Virgin Galactic remains committed to revolutionizing space travel and continues to attract attention and interest from investors. With its strong financial position and expansion plans, the company is well-positioned to capitalize on the growing demand for commercial space tourism.