As if 2020 wasn’t historical enough, 2021 and more precisely, last week, will be remembered for the U.S. aviation safety regulator approving space flights. Last week was a monumental one for space travel as the Federal Aviation Administration (FAA) cleared Virgin Galactic (NYSE: SPCE) for flying customers to space. The company’s shares surged as much as 40% upon the news. They reached $56.40 which is their highest since February, after more than doubling in value this year. The approval comes at a critical time for Branson as his space venture faces off against Amazon.com (NASDAQ: AMZN) founder Jeff Bezos’ Blue Origin and Tesla Inc (NASDAQ: TSLA) “Technoking” and CEO Elon Musk’s SpaceX.
But it was Virgin Galactic that received the green light just one month after a successful test flight from its new homeport in New Mexico that took place in May. Branson will be reportedly flying to space himself in a bid with his rival billionaire Bezos as they race to the final frontier. According to a company statement, it received more than 600 reservations to date for its 90-minute flights that include several minutes of weightlessness. Tickets are priced at $250,000 per passenger.
Concerns Are Somewhat Eased
With its latest earnings report in May, the space tourism company needed its report to alleviate cash-burning concerns. Things did not look good as it had about $617 million in cash on hand at the end of the first quarter, which is down from about $666 million in the fourth quarter. The adjusted EBITDA loss amounted to $55.9 million, but at the very least, it was down from a loss of $59.5 million in the previous quarter. Just like in the prior quarter, the company generated zero dollars of revenue. After being in the business for almost two decades, Virgin Galactic still hasn’t entered a commercialization stage. Things look a lot better now.
SpaceX Could Be Next
Whether you love or hate Elon Musk, or have no opinion, no one can argue Musk hasn’t made an impact on the world. It really doesn’t matter what anyone thinks of Musk as a person, or of Tesla as a brand or an automaker. The truth is that if it weren’t for Tesla and Elon Musk, it’s very likely we wouldn’t be seeing the global transition to clean energy that is pushing an all-electric future across the globe.
Moreover, this same man has a company that’s figured out how to land and reuse rockets. While Musk didn’t invent EVs and he wasn’t the founder behind Tesla, together, they triggered change from legacy automakers, along with virtually every other automaker on the planet.
Just three months ago, Musk confirmed well-sourced reports from NASASpaceflight.com that the company was aiming to attempt Starship’s first orbital launch no later than July 2021. Regulatory documents that were released only two months later revealed more concrete details for the launch attempt. One of the specifications was that Starship and Super Heavy’s first combined launch would include 80 minutes in space before splashing down off the coast of Hawai’i. Soon after, Musk revealed that SpaceX boosted Super Heavy’s engine count from 28 to 29. Moreover, he implied that even the first few orbital launch attempts would use the full 29 engines setup.
SpaceX appears to be more than up to the challenge. The company’s main Hawthorne, California factory has seemingly already “shipped” almost a third of the engines required for Starship’s inaugural orbital test flight and “shipped” likely means that those 11 engines have left the factory and headed to McGregor, Texas, to be cleared for flight.
If SpaceX can clear all Raptors for flight by the end of July, clean qualification testing could possibly leave the first orbital-class Starship and Super Heavy booster ready for launch and their debut before the end of the year or maybe even by August or September- in other words, Space X could also be just around the corner.
Although the successful test flight and the FAA approval mean that questions surrounding the viability of the company’s commercial business have been addressed, the longer-term growth outlook for Virgin Galactic remains blurry. Moreover, from an investor’s perspective, the economic model of space business still isn’t clear. On the other side, there is the macroeconomic environment. If interest rates continue to rise, markets could continue to pivot away from futuristic stocks such as Virgin Galactic. There are many factors that could put pressure on the stock.
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