Virgin Galactic: Canaccord Slashes Price Target From $36 To $8

Last week Virgin Galactic Holdings (NYSE: SPCE) released its first quarter financial results and related commentary. Though the results were basically absent, as the company reported $319,000 in revenue with $91.7 million in operating expenses, putting the company at a total net loss of $98.86 million, or earnings per share of ($0.36). They ended the quarter with $1.22 billion.

In the news release, Virgin Galactic said it had a strong demand for tickets, as they have “approximately 800 future astronaut reservations,” and that the VSS Unity test spaceflight is expected to occur during the fourth quarter of 2022. Though they did announce that they are delaying the commercial service launches by a quarter to the first quarter of 2023, due to “supply chain and labor constraints.”

There are currently 12 analysts covering Virgin Galactic Holdings with an average 12-month price target of US$10.26, or a 51% upside to the current stock price. Out of the 12 analysts, 1 has a strong buy rating, 1 analyst has a buy rating, 7 have hold ratings, and the last 3 have sell ratings on the stock. The street high price target sits at US$16, or a 135% upside to the current stock price.

In Canaccord Genuity Capital Markets’ note on the results, they downgrade Virgin Galactic from a buy to a hold and slash their 12-month price target from US$36 to US$8, saying that “investors need stronger visibility into the completion of the Spaceship/Mothership upgrades before getting bullish on the stock again.”

On the results, they said that the company’s adjusted EBITDA came in worse than expected as the company has been hit by wage and price inflation. However, Canaccord notes that the improved net loss year over year looks good on paper, but was driven by the company no longer having outstanding warrants.

On the delayed commercial flights, Canaccord says that management noted that a number of things are not yet completed on the VMS Eve, even though the hardest part was completed in early April. The contingencies are not completed yet.

Additionally, they say that the VSS Unity is “in a box” at this point in its upgrade process and should be ready to go once the mothership upgrades are complete. Canaccord says that once the VSS Imagine is doing spaceflights in the first quarter of 2023, it will most likely be carrying microgravity experiment payloads and generating revenue.

Lastly, Canaccord writes, “The current strain on the company’s engineering staff, who are being rotated between the Delta-class development project and the Unity/Eve/Imagine manufacturing projects, could potentially create a ripple effect of further delays for the business plan.”

Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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