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Virgin Galactic Initiated Neutral - Prospects Up in the Air

Virgin Galactic's timeline to cash in is "very long, customer adoption and recurrence uncertain," Goldman said, initiating the stock at neutral.
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Shares of Virgin Galactic  (SPCE) - Get Virgin Galactic Holdings Inc Report fell on Friday after Goldman Sachs analyst Noah Poponak began coverage of the space-travel company with a neutral rating.

Virgin was founded and is partly owned by U.K. serial entrepreneur Richard Branson

Poponak pegged his share-price target at $19, below the estimates of all other analysts surveyed by Bloomberg. 

The stock recently traded at $19.29, down 7%. It has dropped 67% this year amid intense competition and uncertain prospects.

Virgin Galactic hopes to lead the pack for private space travel, which could be a lucrative market. But “time to realization of the opportunity is very long, customer adoption and recurrence uncertain, and potential for competition not insignificant,” Poponak wrote in a commentary cited by Bloomberg.

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“The key question for investing in SPCE is how many people will want to fly to space and how much will they pay to do so.” 

Virgin faces stiff competition from Elon Musk’s SpaceX and Jeff Bezos’s Blue Origin.

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

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 Ebitda and cash flow unlikely until 2023.