Why Virgin Galactic Stock Just Crashed
Key Points
Virgin Galactic beat on sales and earnings last night.
That's the good news. The bad news is that Virgin's sales and earnings don't matter right now.
What matters is its flight cadence -- and how slow it will be.
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Virgin Galactic (NYSE:SPCE) stock imploded Friday, tumbling 23.4% through 11 a.m. ET despite beating on top and bottom lines in its Q3 earnings report last night.
Heading into the report, analysts forecast Virgin Galactic would lose $0.47 per share on sales of just $231,670 for the quarter. Virgin beat on both top and bottom lines, with a loss of "only" $0.39 per share, and sales of $430,000.
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Image source: Virgin Galactic.
Virgin Galactic Q3 "earnings"
That sounds like good news, so why are investors upset with Virgin Galactic stock today?
To answer that question, one must begin with the knowledge that neither sales nor earnings mean much for Virgin Galactic stock right now. This is because, for the last two-and-a-half years, Virgin Galactic has been a company without a product -- a space tourism business that can't actually fly tourists to space, having retired its last Unity spaceplane in June 2024.
What's more, Virgin won't begin to resume space tourism flights for another six months, because its Apeiron spacecraft, the first of its Delta-class series of spaceplanes, won't make its first commercial spaceflight before "early Q2 2027," with a second spaceplane joining Apeiron in "late Q2/early Q3 2027."
What's next for Virgin Galactic
Virgin Galactic's value as a space stock depends on flying these two spaceplanes as often as possible. Last week, I hypothesized that a flight rate of four flights per week (about 200 per year) would "practically guarantee" positive free cash flow for Virgin Galactic in 2027.
But here's the problem: In its report yesterday, Virgin now predicts its two spaceplanes together will fly only 150 times per year by the end of 2028. And if that's how things play out, my hunch is this company will still be burning cash two years from now.
Judging from today's selling, it looks to me like Virgin Galactic shareholders simply don't want to wait that long.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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