Virgin Galactic (NYSE: SPCE) has seen a drastic drop in its stock price, now trading at just $0.85 (67p) after falling around 80% in one year. Founded by Sir Richard Branson in 2004, the company aims to make commercial space exploration a reality by taking customers to the edge of space.
Recently, Virgin Galactic completed its 12th mission successfully, marking its seventh commercial spaceflight. However, the company will pause commercial operations for two years to upgrade its fleet to next-generation Delta Class spaceships.
With cash concerns looming, the company will not generate any revenue for the next 18-24 months. Despite having $867m in cash and marketable securities as of Q1, Virgin Galactic burned through $126m in cash while only generating $2m in revenue. The company will need to raise additional funds to cover the costs of building new ships and conducting necessary flight tests.
Although the unit economics of the new spacecraft appear promising, with each flight expected to generate $3.6m in revenue, the company still has a backlog of 800 passengers to accommodate. It may take until 2027 for the company to reach profitability, raising concerns about whether ongoing losses could impact its long-term viability.
With rival Blue Origin resuming spaceflights with paying customers and having strong financial backing, Virgin Galactic faces tough competition. While the company’s ambition is commendable, the high level of uncertainty surrounding its future prospects makes it a risky investment choice.
In conclusion, while Virgin Galactic’s vision is exciting, the current circumstances suggest that investing in the company may not be the best decision at this time.