With the success of SpaceShipTwo's space trip manned by Virgin Records founder Richard Branson, increased buzz and improved investor sentiment on Virgin Galactic stock  (SPCE) - Get Virgin Galactic Report could be expected. But on Monday, news broke that the company decided to sell $500 million in common stocks, sending share price down by 14% at last check.

Figure 1: The Virgin Galactic rocket plane, the WhiteKnightTwo carrier airplane, with SpaceShipTwo passenger craft takes off from Mojave Air and Space Port in Mojave, California.

Figure 1: The Virgin Galactic rocket plane, the WhiteKnightTwo carrier airplane, with SpaceShipTwo passenger craft takes off from Mojave Air and Space Port in Mojave, California.

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The first billionaire into the space

Virgin Galactic founder and billionaire Richard Branson left to space and returned this Sunday, July 11. According to him, the expedition symbolizes the start of a new space age that aims to make space travel more accessible to everyone.

The mission marks an important milestone for Sir Branson’s company in the face of stiff competition with Space X and Blue Origin, two companies founded by mega-billionaires Elon Musk and Jeff Bezos.

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The second billionaire into the space

Speaking of former Amazon CEO Jeff Bezos, it will now be his turn to travel to space on July 20, aboard Blue Origin’s rocket New Sheppard. According to Blue Origin, New Sheppard's space mission is different from Richard Branson's SpaceShipTwo.

New Sheppard is a rocket, not a high-altitude plane. It aims to fly over the Kárman line (internationally recognized as the frontier of space), a feat not accomplished by the Virgin Galactic vehicle. In addition, New Sheppard is less harmful to the ozone layer than SpaceShipTwo.

A look at Virgin Galactic

Aerospace stocks tend to be priced aggressively (SPCE is valued at $11 billion despite virtually no revenues and sizable losses incurred so far) due to the promise of technological progress and far-future opportunities.

Virgin Galactic was the first space tourism company to go public as it tries to build this brand-new market from the ground up by allowing commercial flights for all people. The company believes that, once operations begin, around $1 billion a year in revenue will be generated.

In the first quarter of this year, the company produced more favorable net loss vs. the same period last year – both of which still quite large – while adjusted EBITDA got a bit worse. See below:

Figure 2: SPCE financial results.

Figure 2: SPCE financial results.

The company has a cash and cash equivalent position of $617 million. In its infancy, Virgin Galactic is still focused on maintaining a strong balance sheet, investing organically in growth, and securing access to capital markets.

Wall Street ranks the company as a consensus buy but with a hold bias, and an average price target of $35 (currently $49). UBS and Alembic Global have recently downgraded their buy and overweight ratings, respectively, to neutral.

Bank of America went further and downgraded its rating on the stock from buy to underperform. The research firm claims that, as new aerospace companies go public, the price of SPCE should decline.

WSB mentions

This weekend, SPCE was the most talked about ticker on Reddit’s WallStreetBets, as SpaceShipTwo took to the skies. However, it is interesting to note below that the volume of negative comments was substantial compared to positive sentiment.

SPCE stock has been popular on WSB since June, likely due to the company having one-fifth of its float shorted.

Figure 3: SPCE popularity on WSB.

Figure 3: SPCE popularity on WSB.

Wall Street Memes take

SPCE has behaved like a euphoria stock in the past few weeks at least – up sharply in late June, down sharply in early July. Fundamentally, investing in SPCE presents many risks due to the complexity of the company’s ambitious project to commercialize space travel, especially as competition from well-capitalized rivals ramps up.

But with the feat achieved on the historic July 11, Virgin Galactic took the first step ahead of its competitors. Also, despite the stock sale news on Monday having overshadowed Sunday’s successful flight, the capital raise could be a positive factor for the company’s long-term prospects.

Twitter speaks

Virgin Galactic became an even more popular stock on Reddit, following Richard Branson's trip on Sunday. In your opinion, from this space travel milestone, where do you think SPCE stock will travel to?

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)