Should I Buy Virgin Galactic (SPCE)? Finance YouTuber Analysis

Hoium continues to hold Virgin Galactic despite a 96% drop in shares over three years, acknowledging it as a 'wrong call' but still seeing it as potentially disruptive. He maintains that the gains from other successful investments in his portfolio outweigh the losses from Virgin Galactic, illustrating his strategy of embracing uncertainty and the unlimited upside potential of equity investing.

“Virgin Galactic is actually a company that I covered on This creator. I still think it is a really interesting company, potentially disruptive. Just the idea that going to space is going to be something that happens on a relatively normal basis. But over the past 3 years, shares are down 96%.”

The YouTuber argues that Virgin Galactic presents an asymmetric opportunity due to its extremely low market cap relative to its cash on hand, despite a significant cash burn. He believes that if the company successfully executes its Delta class spacecraft development and commercial flights, it could achieve a 10x to 100x return, making the current valuation attractive for long-term investors willing to wait for the catalysts.

“I think that there is a reasonable chance that the company's actually succeeds and gets everything off the ground as planned... if the company succeeds in getting to the point where they're generating $450 million in revenue on an annual basis generating 75% contribution margin now you get to the point where this is a free cash flow positive company... this is going to be a company worth many many multiple times what it is today.”

The analyst suggests holding Virgin Galactic stock, noting that the company is entering a two-year waiting period for its Delta class spacecraft to become commercially operational. While the economics of the new spacecraft are promising, significant cash burn and the need to hit development milestones on time are critical challenges. The stock's value could increase as the commercial launch date approaches and if milestones are met, potentially allowing the company to raise necessary capital for expansion.

“it's really just a waiting game for basically the next two years there's a number of different Milestones I showed those earlier that Virgin Galactic is going to have to hit and that's going to be the most important thing”

The YouTuber advises caution on Virgin Galactic due to significant volatility and the long wait until the Delta spacecraft becomes commercially operational in 2026. While the company has cash reserves, the market is not valuing future earnings highly, and any delays in the Delta program could be detrimental. He suggests that the recent stock jump on news of Galactic 7 is likely to sell off, as seen with previous flights.

“it's kind of a waiting game for Virgin Galactic and that's going to lead to a lot of volatility in the stock because a lot of investors just don't know what to expect if we're just waiting for the next 2 years to see if all these Milestones are hit and then eventually commercial operations end up happening that's just going to be the kind of stock that a lot of investors are going to say hey I'm I'm out on that”

The YouTuber holds a small position in Virgin Galactic, acknowledging the significant downside risk (potentially zero) but believing the upside is tremendous. The company is currently in a cash-burning phase while developing its Delta spacecraft, with commercial operations not expected until 2026. A rising stock price, potentially due to meme momentum or a short squeeze, could enable the company to raise additional capital, allowing them to build more spacecraft and achieve profitability, which is currently a significant challenge given their limited cash and inability to raise funds at current stock prices.

“I have a small position in Virgin Galactic in the asymmetric portfolio and the reason is I think the upside is tremendous despite understanding that the downside is obviously zero for this stock if things don't work out with their development.”

The analyst believes Virgin Galactic has 100x potential if it successfully navigates the next two years by hitting critical development milestones for its Delta spacecraft. These milestones are crucial for the company to reach profitability and avoid running out of cash before commercial operations begin in 2026. Positive progress on these milestones could lead to a re-rating of the stock, allowing the company to raise capital for further expansion.

“this is why I have called this a 2X or 100x stock I mean this is the kind of company that's either not going to make it or if they do make it and they're doing three or 400 flights per year this is going to be an incredibly profitable company”

The analyst is holding his shares of Virgin Galactic, acknowledging it's a high-risk, venture capital-style investment with potential for significant returns but also a risk of going to zero. He believes investors need to be patient as major milestones and profitability are years away (2026 for commercial flights), and there are no short-term catalysts to drive the stock. The recent lawsuit with Boeing is noted but not seen as a critical threat to the long-term vision, though it could strain cash reserves.

“so that's the path that I'm taking with my shares of Virgin Galactic is just hanging on I don't have a big position and there's a reason for that is a very very high-risk stock could absolutely go to zero but if there is a reward it's multiple years away”

Travis Hoium suggests Virgin Galactic has significant long-term upside potential. He points to the recent ticket price increase to $600,000, which substantially improves the economics per flight, and the company's plans to scale to four to five Delta class spacecraft and potentially multiple spaceports globally. These factors could lead to over a billion dollars in annual revenue and strong profitability by 2027-2028, making it an asymmetric investment opportunity despite current cash burn concerns.

“I think the upside the asymmetric potential for this stock just got a lot bigger because ticket prices going up and now they're starting to talk about building four or five spacecraft for the Spaceport America and actually adding more spaceports throughout the world maybe even by the end of this decade.”

The YouTuber suggests Virgin Galactic is a compelling long-term buy if it can successfully launch its Delta spacecraft. The recent stock price increase is crucial as it allows the company to raise capital, extending its runway to develop the Delta class, which is projected to achieve cash flow positivity by 2026. This capital infusion could alleviate survival concerns and enable the company to build more spacecraft, improving its financial outlook.

“I think that's a much more compelling bullish option for the company if it can get over this hurdle.”

The YouTuber argues that the market's reaction to Richard Branson's statement about not investing further in Virgin Galactic is overdone, as Branson has been selling shares for a long time. However, he implies that the company's future hinges on the successful development and operation of the Delta spacecraft by 2026 to achieve cash flow positivity, which is highly uncertain. He suggests that continued stock sales by Branson would be a red flag, indicating a lack of confidence in the company's trajectory.

“There's plenty of questions facing Virgin Galactic but one is not whether Richard Branson is going to put hundreds of millions of money into the company's future.”

The YouTuber owns Virgin Galactic and views it as a 'zero-x or 100-x' stock. He believes the company's new strategy to cut costs and focus solely on the Delta spacecraft development is the right move for long-term survival, despite the tight cash situation and high risk of delays. He notes that if they successfully navigate the next two years without needing to raise more capital, it could be a phenomenal investment, but acknowledges the significant challenges and potential for further dilution.

“this is again a stock that I own I think there's a lot of potential but I have called this a zerox or 100x stock I think that really holds right now”

The YouTuber suggests avoiding Virgin Galactic due to significant cash burn and the high capital requirements for its Delta class spacecraft. The company needs to raise substantial additional funding, but current stock prices make equity dilution unattractive, and lack of cash flow makes debt financing difficult. Without a clear plan for funding the Delta class, the company's long-term viability is questionable.

“if the answers to those questions are not good then the stock is going to continue to fall and when the stock Falls you run out of options run out of financing options as a company that's not what you want to see from Virgin Galactic and it's not going to help their development either”

The YouTuber argues that Virgin Galactic is in a desperate financial situation, burning $500 million annually with a need for an additional $2 billion to fund its Delta class spacecraft development. While operations are improving, the company faces significant dilution if it raises capital through equity at current low prices, and traditional debt is not feasible. The path to free cash flow positive is several years away (2027-2029), making it a high-risk investment without a clear financing plan.

“Virgin Galactic can't just keep burning $500 million a year and not have enough money to actually build enough Delta class spacecrafts to get to freeze cash flow positive or the stock is just going to eventually grind to zero.”

The analyst argues that Virgin Galactic is not sustainable in its current state, burning cash at a rate of $500 million per year. The company needs to raise approximately $2 billion to fund the development of its Delta class spacecraft and reach free cash flow positive status, which is not projected until 2029 at best. The stock's continued decline limits financing options, making its future precarious.

“What we know right now is that Virgin Galactic at in its current state is not in a sustainable position from a business perspective.”

The YouTuber, a shareholder, highlights three red flags for Virgin Galactic: significant cash burn with less than two years of runway, a falling stock price making it difficult to raise necessary capital, and the exit of key insiders like Richard Branson and Chamath Palihapitiya, which raises concerns about leadership and long-term viability.

“So those are the three things I think investors at least need to be aware of with Virgin Galactic: the company is burning cash, the falling stock price makes it harder to survive to get to the point where they can reach sustainable operations, and insiders have sold a vast majority of their shares.”

The analyst suggests avoiding Virgin Galactic due to its significant cash burn rate and the substantial capital required to develop its Delta class spacecraft. The company's current market capitalization is close to its cash reserves, making it difficult to raise the necessary funds without highly dilutive stock offerings or unfavorable debt, unless it secures strategic partnerships.

“at the current rate of cash burn of about 140 million dollars per quarter there's about six quarters worth of cash that doesn't include building those new Delta spacecraft which are about 50 to 60 million dollars a piece building a new mother ship there's a lot of cost that goes into this business”

The YouTuber suggests holding Virgin Galactic for the long term (5-10 years) despite near-term volatility and cash burn. He believes the company is taking steps in the right direction by prioritizing the Delta spacecraft development, which is crucial for future revenue and profitability, even though it means a long wait until 2026 for commercial operations. He notes that current revenue is low due to older ticket prices, but future prices and flight frequency are expected to increase significantly.

“if you're thinking about this as a long term where's the company going in five to ten years I think we're starting to piece that together”

The YouTuber views Virgin Galactic's recent commercial flight as a positive step towards making space travel more accessible and normal, which is the long-term bullish case. However, he notes that current operations are not profitable and the company relies on the future Delta class spacecraft, not expected until 2026, to achieve sustainability. The company also continues to dilute shareholders by selling more stock.

“I thought this was a great step in the right direction but it's just that it's just a step.”

The YouTuber advises caution on Virgin Galactic due to significant ongoing dilution. The company needs to raise an estimated $2 billion to reach profitability by 2026-2027, and current stock sales at low prices are highly dilutive, potentially reducing existing shareholder value by up to 50%.

“this might be one reason to be a little bit hesitant on being too bullish on the stock until we can see some sort of positive free cash flow in the future because it's potentially going to be the case that the company will have to dilute really heavily as much as 50 percent if the stock doesn't go anywhere just to raise that two billion dollars to get to cash flow positive operations sometime in 2026 or 2027.”

Travis Hoium argues that Virgin Galactic faces a significant financial challenge, needing to raise approximately $2 billion to fund operations and build Delta class spacecraft before becoming free cash flow positive, which isn't expected until 2026 at the earliest. This substantial capital requirement will likely lead to significant shareholder dilution, making the stock a risky investment despite recent price increases.

“I think this is a bigger Financial challenge than a lot of investors are giving credit for right now and Virgin Galactic has a market cap of 1.6 billion dollars I just ballparked that the company's going to need somewhere around two billion dollars to get to the point where it's got Delta spacecraft operational and generating a significant amount of cash if they have to sell that much stock to raise two billion dollars that means about a 50 dilution from the current share price”

The YouTuber highlights Virgin Galactic's significant cash burn rate of $130-140 million per quarter, plus $50-60 million for new Delta class ships, against a cash balance of $900 million. This suggests the company will need to raise more capital soon. While commercial flights are starting, the company has a history of delays and still needs to prove its ability to operate flights repeatably and profitably, making it a risky investment despite the potential of space tourism.

“I think eventually Virgin Galactic is going to have to raise some money but it's good that we're getting to the point where there's going to be Revenue coming in and potentially significant Revenue once these Delta class spacecrafts start operating.”

The YouTuber owns Virgin Galactic but is not adding to his position due to significant execution risk. He emphasizes that the company needs to successfully launch commercial operations in Q2 2023 and provide a clear revenue ramp for its next-generation Delta class spacecraft to justify further investment, as it is currently burning over $100 million in cash per quarter.

“I own it for quite a while but I'm definitely not adding to it until we get some more clarity on when this Delta class of spacecraft are coming what the ramp of Revenue is going to look like.”

The YouTuber sees Virgin Galactic as a highly speculative but potentially high-reward investment, comparing it to early Tesla. The long-term thesis relies on the company successfully launching space tourism flights, which could then fund the development of point-to-point hypersonic travel, leveraging their unique horizontal takeoff/landing infrastructure. The current valuation is attractive given the cash on hand and the potential upside if they execute on their commercial operations.

“I'm intrigued by the risk reward profile I have called this a 0x or 100x stock because I think either my son who's five years old is gonna it's just gonna be normal when he's 15 or 20 to have people going into space on a day-to-day basis just for tourism's sake maybe even mock speed travel is going to be more common than it is today and we just won't think about it it won't be a thing in a company like Virgin Galactic is going to be the one facilitating that but the downside risk is zero so you think that's worth acknowledging with anybody looking into the stock”

The analyst suggests Virgin Galactic could be a 10x opportunity if it successfully launches commercial operations in mid-2023. The company has a strong cash position ($1.1 billion cash, no debt) relative to its market cap (under $1 billion) and projected high margins from space tourism flights, which could lead to significant revenue generation per spaceport. The market is currently pricing it as if it will go bankrupt, creating a high-risk, high-reward scenario.

“if their product works as planned in 2023 we could see this stock really take off as people get more interested in traveling to space so put this one on your radar I think this is a high risk High reward but definitely very high potential stock”

The analyst is bullish on Virgin Galactic due to its current valuation, trading just above its cash value of $1.1 billion, while having a market cap of $1.3 billion. He believes the company has significant upside if it can successfully launch commercial space tourism in Q2 2023 and expand its spaceport operations globally. The potential for Mach speed travel development also presents a 100x growth opportunity, despite the high risk of bankruptcy.

“I own shares of this stock and I'm considering adding more at the current prices because I really like where Virgin Galactic is going.”