SPCE Stock Price Up 35% today – Time to Buy SPCE Stock?

Virgin Galactic shares are up almost 35% today after the Federal Aviation Administration (FAA) updated the company’s license to allow it to transport passengers to space.

This is the first time that the US agency has cleared an operator to transport individuals to space and it is a landmark achievement for the company founded by Richard Branson, with Virgin now fully focusing on its next test flight, which consists of a fully-crewed trip.

This update in Virgin’s license comes less than a month after the company successfully completed its third test flight carrying a crew, with the VMS Eve and VSS Unity achieving Mach 3 speed while reaching an altitude of 55.5 miles.

The reaction of the stock price shows how excited investors are about the news as Virgin Galactic continues to advance toward what could be its first commercial flight carrying customers to space.

Wondering if the price of SPCE will continue to go up from here? The following article takes a closer look at the business fundamentals along with the stock’s technical setup to outline a plausible forecast for SPCE stock.

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SPCE stock – fundamental analysis

SPCE is a money-losing company that shed almost $645 million last year primarily on research and development expenses and administrative overhead. Meanwhile, by the end of the first quarter of 2021, the company had $616 million in cash and equivalents and a small long-term debt of $24 million.

As of today, its market capitalization is sitting at $12.5 billion. The entire valuation of the firm is currently founded on the premise that its vessels will someday be able to fly customers to space – a scenario that seems fairly possible yet uncertainties remain as Virgin Galactic continues to perform test flights.

The FAA approval is indeed encouraging as it means that the regulator is somehow validating the safeness of the firm’s flights. However, it is unclear if these flights will experience enough demand to justify the current valuation.

At the moment, space tickets sold by Virgin Galactic are reportedly priced at $250,000 per seat while the SpaceShipTwo vessel can carry up to six paying passengers, eight in total including pilots.

This means that a regular flight should generate around $1.5 million in revenue for Virgin. If the company operates one flight per day that would result in $547.5 million in revenue within a year coming from roughly 2,200 passengers. That results in a price-to-sales ratio of 22 based on the firm’s market capitalization this morning.

Of course, these are all ball-park estimates, but they can give you an idea of how lofty the valuation for the firm is at the moment and it is also important to consider that it is unclear how much it would cost Virgin to operate those flights.

In the meantime, the firm seems to have enough money to sustain its operations this year while they could turn to the equity market to raise more cash at their currently appealing valuation.

If that happens, chances are that the offering will be priced below the current level but possibly higher than the $19.5 per share Virgin got back on 10 August when it raised $460 million in capital by selling 23.6 million shares. This improvement in the valuation could possibly be supported by today’s development.

According to Seeking Alpha, the consensus price target for SPCE stock currently stands at $31.3, with 6 out of 10 analysts currently covering the stock holding a buy rating while the remaining 4 are neutral.

Investors could expect a wave of adjustments in both price targets and recommendations following this announcement and those could have an impact on the price of the stock. However, the impact could be negative if analysts believe that most of the stock’s upside has already been priced in.

SPCE stock – technical analysis

Today’s jump in SPCE stock is resulting in the acceleration of the uptrend seen in late May this year, back when the price action effectively broke a sharp falling wedge that led to a surge to the $41.5 level.

Since then, the price action has left behind two bullish gaps amid increased interest from retail traders from the popular Reddit messaging board WallStreetBets and the market’s seemingly positive sentiment toward the firm amid the possibility of Virgin becoming the first operator to fly customers to space.

Meanwhile, today’s jump is leaving yet another price gap behind. Even though these gaps are positive in the near term they present a risk moving forward as technical analysis suggests that all price gaps will be eventually filled as a result of the market’s price discovery mechanisms.

For now, the positive momentum that the stock is seeing is possibly opening the door for SPCE stock to reach and even surpass its all-time high of $62.5 per share on the back of investors’ hopes and dreams about space travel.

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