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Recap of Last Week:
We mentioned that CCXI may run up before the FDA approval. The stock price moved from $13.20 to $13.80. This stock has potential to go above $40 a share on a surprise approval which which is set for Wednesday, July 7th
IN THIS ISSUE
Virgin Galactic $58.66 - Finally an FAA approval. After mentioning this stock multiple times, we are happy to say it has reached our price targets. We think it may have a steep drop off to below $50 a share for profit takers, and will then have a steady incline back to 60. More below on new thoughts on where the price will travel.
Virgin Galactic Holdings: SPCE
Virgin Galactic received FAA approval to take passengers into space. This is exciting news for the company and the stock reacted accordingly. Currently up 43% on the news jumping from $40 a share up to $58.66. This is a stock that we have talked about in the past multiple times because we see the value that this company could bring and with the FAA approval they are one step closer to providing a service unlike any other.
Today we are going to:
Humbly brag about our coverage over Virgin Galactic
Talk about the completion of the FAA approval
Additional perspectives about the company’s cash burn and revenue
Reveal where we think the stock price is going next
We had first recommended this stock Dec 13th when the stock was around $30 a share, actually predicting a dip in the price after the failed test flight, then again January 11th at $25 a share with the drop and again around $23 a share in April… The point is we have been accurate from our thoughts on this company. We still have underlying reasonings for further price increases and as test flights get scheduled and executed this stock could be a huge winner.
Space travel will take a few years to perfect and Virgin Galactic is on the path to ensure the safety of the ships and the passengers going on this “out of this world” experience. “The company completed a 29 element verification and validation program for the FAA, clearing the final two FAA milestones with its most recent spaceflight test in May.” Passing all the requirements for the FAA approval should speak to the progress SPCE is making with the quality of their spaceships as well.
It's also important to take a look at how well Virgin Galactic is run as a company. They attempted a test flight in Dec and had engine issues so the test flight was canceled. They pushed the test flight back and were able to successfully launch which granted them the approval needed. Now going forward “The company is working to complete development of its SpaceShipTwo system, with four test flights remaining before Virgin Galactic begins commercial service in 2022.” Now that can be good or bad depending on how you look at it. This stock is still risky as a failed test flight or even worse a crash on one of these tests could send the stock price plummeting down. On the other side, successful ventures could cause the stock price to skyrocket. We would expect the price to rise on the news of the next test flight.
Virgin Galactic has 700 deposits for flight bookings at $250,000 a piece. The customer interest is present and people are willing to drop a quarter million to experience something that seemed impossible. The company could produce Multibillions in revenue by pioneering and being the sole operator that would be able to provide space travel. Currently those of us invested are invested into an idea however SPCE is getting closer and closer to turning that idea into something that produces a decent amount of money. SPCE the 700 deposits for flights translate to $175 Million gross income just to give an idea of what numbers they could put up. Last year they burned 200 Million dollars, this means they have a lot to prove in the future to become profitable. We think profitability will become the biggest focus in the upcoming months. This could drag the stock price down but due to the current crowd sentiment, we think the share price will hang around in the 50’s.
We would expect the price to pull back a little bit when the hype settles down a little and expect it to sit around $50 a share.
Current Price: $58.66
One Month Target: $54.78
We expect a withdrawal due to some profit taking
One Year Target: $71.97
SPCE has potential to blow past this to $80-90 within a year, however we are more conservative now that the milestone of FAA approval has been reached.
Two Year Target: $150
Final Thought: We think buying on a dip in share price if/when it happens would be wise.
This stock is a short term buy in our opinion, If a CRL is announced, then we think it is worth buying at lower levels and holding longer term, we think their science is sound and it just takes a bit more research to prove out this technology
Disclosure: We do hold SPCE at the time of publication.
For all securities mentioned, we do not intend to give investment advice nor recommend acting upon the information.
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Until next week,
and the Optifinancial Team
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