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Virgin Galactic Rockets; Canaccord Sees Long-Term Upside

'[Tourist] activity, particularly from well-known celebrities ..., will provide a substantial positive catalyst" to Virgin Galactic stock, Canaccord says.
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Virgin Galactic  (SPCE)  on Wednesday was rising at warp speed after a Canaccord analyst initiated coverage of the space-tourism company with a buy rating and $35-a-share price target.

Shares of the Las Cruces, N.M., company at last check were up 5.6% to $27.03.

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Analyst Ken Herbert said in a research note that Virgin Galactic is "is a leader in the emerging space tourism market."

"While the ramp on the company’s spaceflight cadence is difficult to predict, we anticipate that tourist activity, particularly from well-known celebrities who travel on Virgin Galactic, will provide a substantial positive catalyst to the stock as the company brings its three existing spaceships into full passenger service," Herbert said.

The analyst said he believed in the long-term upside from space tourism, which he said could be valued at $8 billion by 2030.

"While competition from Blue Origin and others is accelerating, we believe the industry will be supply-constrained for the next several years," Herbert said. 

Blue Origin is the rocket producer founded by Amazon  (AMZN)  Chief Executive Jeff Bezos. Blue Origin is auctioning off one seat for its first mission.

Herbert said Virgin Galactic has recently ramped up its marketing message around the complete passenger experience.

"Management is confident that its 'astronauts' will be strong advocates for the experience and it will benefit from strong customer referrals," Herbert said.

"Moreover – while it is difficult to model – the company anticipates that repeat customers will be frequent, especially as it eventually expands geographically."

Herbert noted Virgin Galactic's recently finished first space flight from Spaceport America, N.M., which marked its third successful trip outside planet Earth.

Last week, Virgin Galactic got a boost after a UBS analyst upgraded the company to buy from neutral.

Analyst Myles Walton, who cut his price target to $36 from $40, cited "retrenchment in the stock from '21 highs on test-flight delays and news today of the flight test catalyst chain now reformed" as reasons for the upgrade.