Virgin Galactic's stock rises after Truist upgrade

By James Rogers

Virgin Galactic's decision to halt commercial operations mid 2024 and deploy capital towards its new Delta spacecraft is 'prudent,' according to Truist

Virgin Galactic Holdings Inc. shares rose 4% in premarket trade Wednesday after Truist Securities upgraded the stock to hold from sell and raised its price target to $3 from $1.

"Our view on the company's operational prospects is unchanged," Truist Securities analyst Michael Ciarmoli wrote in a note released Wednesday. "The company's decision to halt commercial operations mid-2024 to focus on deploying capital towards the development of the Delta fleet is prudent in our view but removes the likelihood of any significant upside or downside catalysts in the near term."

In November Virgin Galactic (SPCE) fleshed out its near-term growth strategy, laying out the roadmap for its new Delta Class spacecraft. The spacecraft will begin flight tests in 2025 and enter service in 2026. "SPCE plans to fly two more 'missions' in 1H24 with its Unity spacecraft before halting commercial operations mid-2024 to focus on utilizing resources on the development of the Delta-class fleet, from which the company targets to generate revenue in 2026," wrote Truist's Ciarmoli, in the note. "While we remain skeptical that this is achievable on time and within budget, we do not anticipate any meaningful developments to the upside or downside during 2024."

Related: These are the space stocks to keep an eye on in 2024

Virgin Galactic also has no near-term liquidity concerns, according to Ciarmoli. "As of 9/30/2023 the company had approximately $1.1B of cash and marketable securities, which in our view will be sufficient to fund the company's near-term plans without the need for additional capital raises this year," he wrote. Of 12 analysts surveyed by FactSet, two have a buy rating, five have a hold rating, and five have an underweight or sell rating for Virgin Galactic.

Justus Parmar, CEO of Fortuna Investments, a venture-capital and advisory company currently focused on space investments, recently told MarketWatch that Virgin Galactic is particularly worthy of attention, pointing to the company's market cap of $1.06 billion and its cash balance. "The reality is that the market is not valuing them at all," he said. "This would be interesting to watch in terms of 'does that change over the course of the year?'"

Virgin Galactic's stock tumbled last month after founder Sir Richard Branson ruled out further investment in the space-tourism company. "It should, I believe, have sufficient funds to do its job on its own," he told the Financial Times.

Related: Virgin Galactic's stock slides 17% after Sir Richard Branson rules out further investment

Virgin Galactic narrowed its quarterly loss and more than doubled its revenue when it reported its third-quarter results in November. The company's revenue rose to $1.73 million, compared with $767,000 in the prior year's quarter.

The company's shares have fallen 46.9% in the last 52 weeks, compared with the S&P 500 index's SPX gain of 21.4%.

Claudia Assis contributed.

-James Rogers

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

01-10-24 0825ET

Copyright (c) 2024 Dow Jones & Company, Inc.