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Investment bank Credit Suisse has reiterated an outperform rating on Virgin Galactic (NYSE:SPCE) stock, and has argued that investors should seriously consider getting into the shares prior to the final development phase of Virgin Galactic’s space tourism project. The bank said that improving visibility on the company’s flight schedule combined with a lack of other listed options for space industry investment made the stock a compelling one.

Virgin Galactic shares sink from July highs

Virgin Galactic stock had been creating tremendous enthusiasm going into July, trading up from $15 to peak just north of $25 in late July. Since then shares have slipped considerably, and at the time of writing were available on NYSE at about $17.70. The recent buy ratings have given the stock a slight uptick, but it is not breaking trend.

Investors are focused on when the next test flight will be taking place and this seems to be why a note of caution has entered into the market for the company’s shares.

UBS has also provided Virgin Galactic with a buy rating as it initiated coverage of the company. UBS said the stock looked like it could climb by more than 50% over the next year and predicted that space tourism could become an $800bn industry by 2030. UBS said it had a target price in place for Virgin Galactic of $25.

“Going to space isn’t routine. In fact, it’s exceptional; but the entrance of billionaires into the space realm makes it more plausible now,” said UBS analyst Myles Walton. “Given the level of advanced reservations and broad public interest in space, we believe there is demand for a safe, reliable option for space travel.”

Investor focus will be on Virgin Galactic’s next space flight

The company’s next test flight is scheduled for 22 October. After a 20 month hiatus, it plans to launch its VSS Unity vehicle from Space Port America in New Mexico.  The flight will be the first of two remaining suborbital tests that are designed to clear the way for real commercial space flights in the new year. The company has never been fully transparent on the long delay – 20 months – since its last test flight.

Virgin Galactic has confirmed that more than 600 people have reserved seats and that more than 700 people have out down refundable $1000 deposits for tickets. It has not been clear about how much it is actually selling tickets for.

Virgin Galactic announced last month that it had a non-binding memorandum of understanding in place with Rolls-Royce to collaborate on the design and development of engine propulsion technology for high speed commercial aircraft.

Near orbit tourism is likely to become a big thing with the ultra rich in the next decade or so. There are still not many companies competing in the space, as it remains something of a cash sink. But the demand is there, with only a limited number of places on offer from the likes of Virgin Galactic, Space X and Blue Origin.

UBS in its note says it sees demand far outstripping supply in the next few years, as the companies in the sector are reporting a very robust backlog of orders. It expects Virgin Galactic to quadruple ticket sales at a compound annual growth rate of 300% through 2024.

The opportunities in space travel remain considerable, and UBS is right about the lack of public investment opportunities: if you are a big fan of the growth prospects of commercial space flight, Virgin Galactic is one of the few viable prospects out there for stock investors. But there are still a lot of unanswered questions here.


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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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