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Virgin Galactic Up as Space-Travel Potential Draws Buy Ratings

Virgin Galactic's "unique offering ... will allow civilians and professionals alike to access space," Susquehanna says, rating the stock positive.

Virgin Galactic  (SPCE) - Get Virgin Galactic Holdings Inc Report shares jumped Monday after the space-travel company drew buy-equivalent ratings from two major investment firms. 

Susquehanna analyst Charles Minervino initiated coverage of Virgin Galactic with a positive rating and $20 share-price target.

Founded by the U.K. entrepreneur Richard Branson, Virgin Galactic is an “innovator of space technology with a truly unique offering that will allow civilians and professionals alike to access space for entertainment and research purposes,” Minervino wrote in a commentary cited by Bloomberg.

“While this is an untested market, we believe SPCE’s offering will be tapping into significant latent demand for space tourism.” The company’s revenue streams can spread, he said.

To be sure, the company is just starting to take off, Minervino said, with positive earnings before interest, taxes, depreciation and amortization and cash flow unlikely until 2023.

At the same time, Susquehanna derivatives strategist Chris Jacobson recommends that investors use options to protect themselves against the volatility of Virgin Galactic’s stock, Bloomberg reports.

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He suggests selling April $30 calls and buying April $11 puts for a 21-cent credit against a stock reference price of $16.43.

In addition, Bank of America analyst Ron Epstein, in a note to investors cited by CNBC, wrote, “While Virgin Galactic is not yet operational, the company is gearing up to begin serving customers in early 2021. 

"We believe SPCE’s growth potential is unparalleled vs. our coverage and the current nascent stages of the company provide investors with a unique entry point into the stock.” 

Earlier this month, UBS analyst Myles Walton began coverage of Virgin Galactic with a buy rating and a $25 share-price target.

The company represents the only path for consumers to "gain entry into the 560-member astronaut club in the next five years," Walton wrote in a commentary cited by The Fly.

The company provides a unique experience, given the "curation" of its product from marketing to "life-long brand connection," he said.

Shares of the Las Cruces, N.M., company recently traded at $19.11, up 16%. They have rocketed 59% year to date.