Virgin Galactic share price: what to expect from Q2 earnings

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With Virgin Galactic’s Q2 earnings in sight, we explore what investors and traders need to know.

Source: Bloomberg

 

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 Jeremy Naylor | Writer, London | Publication date: Monday 26 July 2021 

When does Virgin Galactic report earnings?

Virgin Galactic Holdings Inc (SPCE:US) reports financial results for quarter two (Q2) of 2021 following the close of the US markets on 5 August. The release comes at an interesting time, for the business, having achieved the major milestone by undertaking the first civil passenger flight to brush space.

 

What does Virgin Galactic do and what should traders be looking for?

Virgin Galactic pitches itself as a vertically integrated aerospace and space travel company, pioneering human spaceflight for private individuals and researchers. It manufacturers its own air and space vehicles and will continue to refine spaceflight systems designed to offer space travel to private individuals.

Having achieved history, on 11 July this year, as being the first space flight to lift-off with private passengers aboard and being designed with the specific job of opening up space travel to private citizens, the work now really begins. Founder Sir Richard Branson was aboard the flight to witness the experience.

What to expect in Q2

The costs associated with pioneering space travel are so immense, it is difficult to accurately predict, on a quarterly basis, what to expect. However, what we do know is that, going into Q2, back on 1 April 2021, the company had cash and cash equivalents of $617 million, but recorded a quarter one (Q1) net loss of $130 million. That compared favourably to the same period last year when it published a loss of $377 million.

Clearly, this first space trip, in Unity22, as the reusable space craft is called, was always going to be disproportionately expensive. However, the business model is now to work on a commercially competitive package for people to fly over the margin of earth’s atmosphere up into space.

In an effort to move ahead with the plan, Virgin Galactic is going to need considerably more money. To this end the company announced plans to sell $500 million of stock, which came the day following the inaugural flight. This wiped $1 billion off the company’s value, immediately, taking its market capitalisation down to $7.4 billion.

How to trade the stock

Source: IG

 

Shares of the space tourism pioneer, which went public in October 2019, at $11.79 per share via a reverse merger, not a traditional initial public offering (IPO), have had the proverbial rollercoaster ride.

Investors and traders need to know that volatility in the stock is to be expected. The company is a cash gobbler and it is inevitable that there will be unexpected hurdles along the way in the tight schedule it has set itself.

Moving from left to right across the chart, the stock price saw the first big leg up just ahead of the point at which the Covid-19 pandemic struck. At the time there was the statement that, assuming that launch occurs as planned, management projected that the company would reach profitability in 2021.

Thereafter, a disappointing delay to a space flight saw a stock pull-back, then came the bold prediction of space flight within the year saw a 175% rise in just four weeks at the start of 2021. A delay to earnings brought about another wobble, but traders and investors need not have worried as the release date thereafter saw a 300% rise in just six weeks.

Will the company now be able to provide a clearer picture of how the remainder of this year develops, will it be able to share its vision for the second half with any clarity from within the Q1 earnings release? It really is down to your own personal view as to whether the whole venture will succeed.

Find out more on how to buy, sell and short Virgin Galactic shares

Virgin Galactic shares: where next?

Branson, a master of publicity, timed the first manned spaceflight to steal a march on his arch rival, Amazon founder Jeff Bezos, for maximum impact. But Bezos, in his Blue Origin rocket, went further and has a more detailed plan for commercial space travel. How it will all end for each remains to be seen, but the bottom line is that, to succeed, each will need a steady stream of people willing to stump up a disproportionate amount of money for such a short thrill.

As Ray Davies wrote for The Kinks: ‘Let me take you on a little trip, in my supersonic rocket ship’ foreseeing the opportunity that will, surely, come our way at some point. The big question is whether it will be Virgin Galactic that will end up being a regular provider of commercial trips beyond our atmosphere.