On Wednesday, Susquehanna adjusted its outlook on Virgin Galactic (NYSE:SPCE), lowering the price target to $8 from the previous $24, while maintaining a neutral position on the stock. The firm's decision follows Virgin Galactic's execution of a 1-for-20 reverse stock split in June, a strategic move to satisfy the New York Stock Exchange's minimum bid price requirement for continued listing.
The analyst from Susquehanna highlighted that despite the significant change in the price target, the firm's estimates for Virgin Galactic remain unchanged. The focus continues to be on the company's cash burn, given its current operational stage and low revenue generation. The forecast for the second quarter of 2024 indicates a free cash flow of negative $114 million to negative $539 million.
Virgin Galactic's recent reorganization of priorities has been cautiously acknowledged by Susquehanna, suggesting a potential positive development for the company. Nevertheless, the firm expressed skepticism regarding Virgin Galactic's ability to implement its plans within the anticipated timeframe.
The price target adjustment reflects a recalibration after the reverse stock split rather than a change in the fundamental valuation of the company. Susquehanna's neutral rating suggests that the firm does not see significant upside or downside potential for Virgin Galactic's shares in the immediate future.
In other recent news, SpaceX experienced an unusual malfunction with its Falcon 9 rocket during a Starlink satellite mission, potentially impacting the deployment of 20 satellites. The second-stage engine failed to reignite for a second burn, leaving the satellites in a lower than planned orbit. This marks the first significant failure for a Falcon 9 rocket in over seven years.
Meanwhile, Virgin Galactic announced the completion of its new Phoenix, Arizona manufacturing facility, a significant step towards the assembly of its Delta-class spaceships scheduled to commence in 2025. The company's CEO, Michael Colglazier, emphasized the facility's importance for the development of the fleet. Virgin Galactic also regained compliance with the New York Stock Exchange's minimum share price requirements, as confirmed by a recent 8-K filing.
SpaceX has been awarded an $843 million contract by NASA for the development of a vehicle to safely dispose of the International Space Station by guiding it into Earth's atmosphere around 2030.
This task, initially expected to be performed by Russia's thrusters, marks a significant milestone for SpaceX. Virgin Galactic also announced a partnership with the International Institute for Astronautical Sciences to launch three research astronauts on a future mission aboard the company's Delta Class spaceship.
InvestingPro Insights
Amidst the adjustments by Susquehanna, Virgin Galactic (NYSE:SPCE) presents a mixed bag of financial metrics and market performance. The InvestingPro data reveals a market capitalization of $165.37 million, which, when paired with a Price / Book multiple of just 0.4 as of the last twelve months up to Q1 2024, indicates that the stock is trading at a relatively low valuation compared to its book value. This could suggest a potential opportunity for value investors, especially when considering that the company holds more cash than debt on its balance sheet.
However, the company's cash burn rate is a point of concern, reflected in the significant negative free cash flow and a gross profit margin of -767.52% over the same period. This aligns with the Susquehanna analyst's focus on Virgin Galactic's cash burn. Additionally, with a P/E Ratio of -0.33, the company is not currently profitable, a fact that analysts expect to persist throughout the year.
Investors should take note of the stock's recent performance, which includes a significant return over the last week, yet it has experienced a steep decline of 89.39% over the past year. This level of volatility is characteristic of Virgin Galactic's stock, which often trades with high price volatility. For those interested in a deeper dive, there are over 10 additional InvestingPro Tips available, which can be accessed through the InvestingPro platform. To enhance your investment research, use the exclusive coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
As Virgin Galactic navigates its operational challenges and works towards its milestones, investors should keep a close eye on these financial indicators and market movements for a more informed investment decision.
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