Shares of Richard Branson’s Virgin Galactic fell on Monday after the aerospace giant’s stock was downgraded from a buy rating to a hold rating by Truist Securities analyst Michale Ciarmoli. The company cut its price target on Virgin Galactic from $24 to $8 per share.
|SPCE||HOLDINGS VIRGIN GALACTIC INC.||6.07||-0.73||-10.74%|
The move comes after Virgin Galactic announced on Thursday that it would push back commercial service for its spaceflights from the fourth quarter of 2022 to the first quarter of 2023, citing “escalating supply chain and labor constraints. of work”.
“The combination of supply chain delays, timing risk, slippage of commercial flights into 1Q23, a lack of operational catalysts and rising interest rates drive our reasoning lower,” Ciarmoli wrote in a note to clients on Monday. “We believe the supply chain and tight workforce could lead to further business operations slippages and believe a return to flying may not materialize until 2Q23 or later. interest rate weighs considerably on our [discounted cash flow] model given the majority of our valuation resides in our terminal value assumption.”
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The company, which opened the sale of tickets for its commercial space flights to the public in February at $450,000 per seat, has secured about 800 reservations from future astronauts. Virgin Galactic aims to reach 1,000 bookings by the start of commercial service.
While commercial service has been pushed back, Virgin Galactic still plans to return to space in the fourth quarter with a test flight of its VSS Unity spaceplane and VMS Eve mothership after their upgrade period. current. The upgrades are designed to improve ship construction and reliability to allow for a higher rate of frequency theft in preparation for commercial service.
Its second ship, VSS Imagine, is scheduled to make its first test flight in space in the first quarter of 2023 and is expected to begin private service mid-year after several revenue-generating test flights. Once commercial service begins, VSS Unity is expected to fly once a month, while VSS Imagine will fly twice a month.
Meanwhile, Virgin Galactic’s Delta-class fleet is scheduled to begin flying in 2025 with commercial service expected in 2026. A new manufacturing facility, which will have the capacity to produce up to 6 Delta-class spacecraft per year, will should be online at the end of 2023. .
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Virgin Galactic reported a net loss of $93 million in the first quarter of 2022, compared to a loss of $130 million a year ago, on revenue of $310,000. Looking forward, the company expects free cash flow to be between negative $80 million and $90 million.
Virgin Galactic shares are down more than 50% year-to-date at press time.