Virgin Galactic Plummets on Analysts' Concerns About Valuation

Virgin Galactic Holdings is falling after two analysts downgrade shares of the aerospace company.
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Virgin Galactic Holdings (SPCE) was falling at warp speed Thursday, dropping 19% to $23.40, after two analysts downgraded shares of the aerospace company over concerns about its valuation.

Adam Jonas, an analyst with Morgan Stanley, downgraded entrepreneur Richard Branson’s space transport company to equal-weight from buy, but also raised his price target to $30 a share from $22.

In a note to clients, Jonas said he remained "constructive on the long-term potential of SPCE, medium-term forecasts for space tourism based on strong growth in registrations of interest, and execution of testing milestones."

Jonas said the company's management stressed the importance of each step of the testing process and was learning from each mission.

"We expect this process of continuous refinement will ultimately be measured in years and will continue concurrently with the early commercial missions," he wrote. "We make this point to emphasize that management’s mission to be a sustainable and highly successful/profitable commercial spaceline will require a confluence of events to come together over many years and in a potentially (if not likely) non-linear manner."

Credit Suisse analyst Robert Spingarn cut his rating on the Las Cruces, New Mexico-based company to neutral from outperform, saying that while Virgin Galactic "remains a compelling story from the perspectives of near-term catalysts toward first revenue flight, its leading market position, strong incremental margin potential, and the scarcity value of the investment opportunity... we find ourselves no longer able to recommend SPCE shares after a ~185% YTD run and commensurate expansion in the stock’s multiple (now trading at ~21x 2024 EV/EBITDA—undiscounted)."

Spingarn, who raised his price target to $25 from $15, viewed "upside potential as currently unearned given that SPCE has not yet achieved its phase 1 goals, as well as the significant engineering, financial, and competitive challenges that the phase 3 expansion is likely to face."

Founded in 2004, Virgin Galactic is a spaceflight company within the Virgin Group that is developing commercial spacecraft to provide suborbital spaceflights to space tourists and suborbital launches for space science missions.