By Michael Elkins
Wolfe Research upgraded Virgin Galactic (NYSE:SPCE) to a Peer Perform rating (From Underperform) and set a $4.00 price target on the stock after the commercial spaceflight company’s WhiteKnightTwo Eve took to the skies for the first time in 18 months.
The WhiteKnightTwo is the fixed-wing launch platform for the company’s SpaceShipTwo spaceships that are set to carry paying passengers to suborbital space.
Analysts wrote in a note, “Although, the flight is about a month behind the early-Jan timeframe laid out on the Nov earnings call, it’s the clearest sign that an event path of milestones toward commercial service could be forming in the next 3-5mo that would dominate the stock.”
Wolfe continues to see the fundamental business case for SPCE tied to manufacturing and introduction of the Delta class of spaceships, which will be able to fly 1/week vs. the current spaceship, Unity, which can fly 1/month. Prior to the Delta introduction, Wolfe sees FCF burn of $400M-$450M/year for the next few years against their projection of $1.1B-$1.2B of cash and marketable securities at YE22, which they think means another $500M-$750M+ of debt/equity issuance to bridge to FCF generation in 2027 in a base case assumption.
Shares of SPCE are up 0.50% in premarket trading on Friday.