On the last trading day before Richard Branson’s planned trip into space, shareholders of Virgin Galactic Holdings (NYSE:SPCE) are taking a “risk off” approach to the stock. Virgin Galactic traded down as much as 7% on Friday morning before recovering somewhat, but as of lunchtime it was still in the red on a day when the overall markets are in rally mode.
All eyes will be on the Virgin Galactic Spaceport America near Truth or Consequences, New Mexico, on Sunday when Branson will make his long-awaited trip into space. It’s an important milestone for the nascent space tourism company, and a great marketing opportunity for the brand.
Branson had originally hoped to fly last year to mark his 70th birthday, but a combination of pandemic-related delays and testing setbacks have delayed Virgin Galactic’s timetable. Last month, the company won regulatory approval to fly passengers into space, and the Branson flight will be one of the final test flights before regular service starts in 2022.
Shares of Virgin Galactic have climbed more than 200% since mid-May, and accelerated that climb when the approvals were granted and it appeared a Branson flight was imminent.
Of course, for all of the excitement, there is risk that comes with flying to space as well. After the massive run-up in the shares, investors on Friday appear to be taking some money off the table in case things don’t go to plan on Sunday.
It’s wrong to call Sunday’s flight a make-or-break moment for the company, but it is certainly important. A successful flight finishing with a smiling Branson could do wonders to win over skeptics. Any issues — even a benign technical glitch that causes a postponement — would be a very public setback.
No matter how the test goes, Virgin Galactic still has a series of boxes to check before it can start regular service. And it remains a company that, despite its $12 billion market capitalization, has an uncertain total addressable market and deep-pocketed competition. There is still a lot of uncertainty about the long-term trajectory of the stock.
But it does seem very likely that Monday’s trading will be heavily influenced by what happens on Sunday. On Friday, investors are doing a little profit taking just in case the weekend doesn’t go to script.
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