Buy Virgin Galactic Stock Because 250,000 People Want to Go to Space. (And Can Afford It.)
The Virgin Galactic SpaceShipTwo space plane Unity returns to earth after the mothership separated, at Spaceport America (Photo by PATRICK T. FALLON/AFP via Getty Images)
AFP via Getty Images
Stock in space tourism pioneer Virgin Galactic is on the move Tuesday after it found a new bull on Wall Street—one that believes hundreds of thousands of people will eventually pay to experience weightlessness.
Galactic (ticker: SPCE) stock is up almost 7% in early trading. The S&P 500 is down 0.2%. The Dow Jones Industrial Average is off about 0.1%.
Jefferies analyst Greg Konrad is the reason for the jump. He is excited about space tourism. And he is recommending his clients buy Virgin Galactic shares to profit from the potentially huge new market. Konrad launched coverage with a Buy rating and $33 price target.
His “attractive outlook is boosted by supply ramping with additional spaceships driving capacity to 660 flights/year by 2030 up from capacity of roughly 36 [a year] today,” wrote the analyst in a Tuesday report. Konrad projects that capacity will generate $1.7 billion in sales and almost $680 million in operating profits by the end of the decade.
He doesn’t see any problems filling the capacity. Konrad surveyed 223 people with net worths greater than $1 million and found about 37% were interested in going to space. What’s more, 20% were willing to spend 5% of their net worth to get there. “Coupled with rising wealth, this implies a potential[$120 billion] market for commercial space over time,” added the analyst.
That is based on about 250,000 people with the means, and willingness, to travel to space. It’s the total market and not the annual market. But with 660 flights able to serve less than 4,000 of the 250,000 each year, Galatic demand can stretch out for years.
A Galactic spacecraft seats six. Konrad’s average ticket price in 2030 is $500,000 per seat.
It’s a needed bullish take for the stock. Overall, Wall Street has grown lukewarm on Galactic after shares had a big run in 2020. Back about one year ago, 100% of analysts covering the stock rated shares Buy. But the stock was trading at about at less than $18 a share.
Now with the stock at $26.88, only 36% of analysts, or four out of 11, rate shares Buy. The average Buy-rating ratio for stocks in the S&P is about 55%. The average analyst target price is about $35 a share, implying gains of about 30%.
Back in September 2020, when everyone rated shares Buy, the average analyst price target implied gains of more than 40%. Those are big implied gains. Wall Street seems to want a large potential return for investing in new markets.
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