Why this Virgin Galactic analyst remains bearish


Even if Virgin Galactic Holdings Inc (NYSE: SPCE) is closer to realizing space tourism, the outlook is already reflected in its market valuation, according to BofA Securities.

Virgin Galactic analyst: Ronald Epstein maintained an underperformance rating on Virgin Galactic with a price target of $ 41.

Virgin Galactic takeaways: The company has completed the 22nd test flight of the VSS Unity and the first test flight with a full crew in the cabin, Epstein said in the note.

“Yesterday’s flight brings the company closer to space transportation with commercial paying passengers, whom the FAA recognizes as” spaceflight participants, “the analyst wrote.

“The SPCE has not announced when it will start its commercial service to the last frontier. We would expect that in the first half of next year, ”Epstein noted.

While noting that the risk reward appears “more skewed on the downside”, he added that the valuation of Virgin Galactic shares “reflects more than the underlying financial fundamentals and gives the company a more than healthy multiple premium for potential growth.

“The company is still several years away from generating positive cash flow, according to our financial projections, free cash flow will only turn positive in 2025,” Epstein wrote.

SPCE price action: Virgin Galactic shares fell 17.3% on Monday, closing at $ 40.69.

Photo: a Virgin Galactic spacecraft.

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