Virgin Galactic Stock on the NYSE
On October 28, Virgin Galactic (NYSE:SPCE) officially became the first space stock on the New York Stock Exchange. And its first day was, well, boring. It ended up flat as it traded under the name Social Capital Hedosophia Holdings Corp, following the company’s merger that made it public in the first place.
But while Virgin Galactic stock’s relatively boring first day may have disappointed some investors who were looking to see big gains fast, those who are going long on the stock should be very, very happy.
In fact, I believe that Virgin Galactic has the potential to live up to its namesake and see otherworldly stock gains.
First, let’s explore why seeing little to no early gains is actually a very positive sign for SPCE stock.
The thing is, whenever you see a stock that has a lot of buzz surrounding it, there’s often a chance that it will soar high in the immediate aftermath of its initial public offering (IPO)—or in this case, a pseudo-IPO—only to see significant falls as time goes on.
We’ve seen it play out many times before, with catastrophic failures from companies like Tilray Inc (NASDAQ:TLRY), a marijuana stock that gained more than 1,100%, only to see that number drop to about 35% a year later.
In other cases, the rise may be appropriate for an exciting-enough company (Beyond Meat Corp (NASDAQ:BYND) being a good example), but eventually investors could grow a little skittish when stocks soar as high as BYND stock did, leading to an eventual cooldown.
But in the case of Virgin Galactic stock, its share price remained flat and then fell after a couple days of buildup to the ersatz Virgin Galactic IPO.
Chart courtesy of StockCharts.com
SPCE stock is trading at about $9.50 as of this writing, putting it in penny-stock territory and making it a very strong opportunity to go long on.
The reason why is that investors did not artificially drive up its price with hype. Instead, they played it sober and gave the company a solid but not mind-blowing bump.
This means there is little chance of a massive market backlash—and a lot of opportunity for massive gains in the future.
You see, without a big bump, there’s little chance of a swift downturn. This means investors can hold on to Virgin Galactic stock without having to hold their breath at the same time, worried that it will come crashing down to Earth.
So what we have is a space tourism stock that is likely to remain rather stable in the coming months. So why then my enthusiasm for this company? Simple: it’s operating in the technology sector, specifically in a sector that is in need of massive innovation and which could expand for decades to come.
Think about it like this: Apple Inc’s (NASDAQ:AAPL) “iPhone” revolutionized the phone industry. The first model was truly innovative, creating a global smartphone craze.
But since that first iPhone model, the company has been iterative rather than innovative. Which is to say that Apple banks on small and subtle improvements each year leading to an onrush of new customers.
Apple’s other forays into innovation have fallen flat (think the “Apple Watch”). The company simply hasn’t had another hit like the iPhone or the “iPod” before it.
Which isn’t to badmouth Apple; radical industry-defining innovations don’t come along very often. But in the case of Virgin Galactic, I believe that the company has the potential to deliver industry-defining goods and services.
Consider that SPCE stock is the first opportunity for investors to gain exposure to the space tourism sector. While not a massive sector by any means (most people cannot afford the $250,000 price tag that a trip on a Virgin spacecraft costs right now), the company has a solid consumer base.
Virgin Galactic has a wait list 600-deep that will earn it strong revenue for months to come. As the company increases its revenue, it will be able to expand, adding more flights and more crafts to its fleet.
So the company has a solid revenue base that will likely only increase as time goes on. Couple that with a very reasonable valuation of $1.5 billion and we have stable foundations in place. (Source: “Virgin Galactic is set to trade on the NYSE on Monday as the first space tourism stock,” CNBC, October 24, 2019.)
And now for the potential: the company can swiftly grow. The reason is that the space industry is ripe with opportunities for companies to create products that could redefine the industry.
For instance, if Virgin Galactic can find a way to radically decrease the prices of its flights, then expect to see the company skyrocket in terms of revenue. After all, there’s a good many people out there wanting to catch a glimpse of outer space.
Then, of course, you have another very lucrative aspect of the space industry: science. Government contracts can be lucrative indeed when it comes to space work, and Virgin hopes to perform scientific experiments using its spacecrafts and technology.
With Virgin Galactic stock being the only active player in this industry currently available to the public, investors keen on getting in on the space business really only have one option.
And this isn’t all cockeyed daydreaming; companies like SpaceX have already shown they have the ability for massive innovation. In SpaceX’s case, the company was able to land a rocket for reuse—the first time that’s ever been done.
Being able to reuse rockets in space launches (different than Virgin’s mission to see just the threshold of space) will undoubtedly lead to massive reductions in cost for space travel.
Innovations like that in a nascent industry can pay off with massive returns for investors. Right now, there’s only a few horses in the race besides Virgin Galactic, meaning that the chances for this company to spearhead one of these innovations is high.
And, of course, it’s worth noting that this company is something of a passion project for billionaire Richard Branson.
And he’s a highly influential billionaire at that, known to associate with extremely powerful figures (pictures of Barack Obama and Branson partying on the latter’s boat made the rounds in the days after Obama left office).
All this culminates in a company absolutely brimming with potential in a very lucrative industry, with the ability to throw a ton of resources toward innovation. In other words, Virgin Galactic has a recipe for success.
The future of SPCE stock is looking strong after its early days on the market, and I believe this space tourism stock could be a winner in 2020.