Truist Securities slashed its price target for Virgin Galactic after the commercial space company delayed its flight schedule until next year.
Truist cut its price target for Virgin Galactic (NYSE: SPCE) from $36 to $8. This came after Virgin Galactic’s price fell nearly 13 percent over the past week. In June 2021, company shares sold for nearly $60 a share—as of Monday afternoon, it was down to $6.22.
Truist has since downgraded Virgin Galactic’s rating from Hold to Buy.
“The combination of supply chain delays, timing risk, slide-out of commercial flights to [first quarter 2023], a lack of operational catalysts and rising interest rates drive our downgrade rationale,” said Truist analyst Michael Ciarmoli.
How We Got Here
According to its website, Virgin Galactic cites supply chain issues and labor constraints as the main factors for its delay of flights to early next year.
Despite that, the company plans on conducting its VSS Unity Test spaceflight in Q4 of this year.
“We are executing on our plans to scale the business by developing our future fleet, investing in digital manufacturing technologies, and building out our commercial strategy to deliver a consumer experience like no other,” said Michael Colglazier, chief executive officer of Virgin Galactic.
“Against a backdrop of escalating supply chain and labor constraints, our teams are containing the majority of these issues to minimize impact on schedules. We look forward to returning to space in the fourth quarter and launching commercial service in the first quarter of next year.”
Unfortunately, this isn’t the first time Virgin Galactic has seen investment trouble. Last November, the company delayed flights in order to make enhancements to its aircraft. The delay resulted in a $48.8 million third-quarter loss. A year prior, the company reported an even bigger loss of $92.1 million.
Virgin Galactic differs itself from the likes of SpaceX and Blue Origin by providing a purely recreational service. While Blue Origin has flown commercial flights for celebrities like Michael Strahand or William Shatner, part of their goal involves contracts with NASA for scientific missions in low-Earth orbit and beyond.
SpaceX currently holds contracts with NASA, and has flown multiple crews to the International Space Station (ISS). So far, Virgin Galactic has not announced any full-fledged mission partnerships with NASA or other national space agencies.
What Happens Next
Ciarmoli suggested that Virgin Galactic’s delays may extend further.
“We see supply chain and labor tightness potentially leading to additional slippages of commercial operations and believe a return to flight might not materialize until 2Q23 or later,” he added.
Once Virgin Galactic survives its delays, the company aims to offer up to 400 flights per year. If you’re considering buying a ticket, now is a great time to start saving—a single ticket will set you back $450,000.