On Monday, TD Cowen adjusted its financial outlook on Virgin Galactic (NYSE:SPCE), reducing the company's stock price target to $2.00 from the previous $2.50. Despite the lower price target, the firm has maintained a Buy rating on the stock. The analyst at TD Cowen believes that Virgin Galactic's timeline to achieve positive Free Cash Flow (FCF) by the second half of 2026 is still achievable.
Virgin Galactic has successfully completed six over the past six months and plans to conduct one additional flight in June. Following this, the company will take a break from flights to concentrate on the construction of two VSS-Delta spaceships. These new spaceships are expected to generate $450 million in annual revenue with a 75% contribution margin once operational.
The first quarter's Free Cash Flow was reported at a negative $126 million, which aligned with the company's previous guidance. The firm has provided guidance for the second quarter, anticipating revenues of $3.5 million and Free Cash Flow in the range of negative $110 million to $120 million. This guidance is consistent with Virgin Galactic's trailing twelve months average FCF, which stands at a negative $120 million.
The analyst's commentary highlighted the company's steady progress towards its financial goals. With the upcoming pause in flights to focus on the development of the VSS-Delta spacecraft, Virgin Galactic is laying the groundwork for future revenue growth and margin improvement. The company's financial performance indicators, such as the first quarter FCF and the guided figures for the second quarter, suggest that it is managing its cash flow in line with expectations.
Virgin Galactic continues to make strides in the commercial spaceflight industry, and the updated financial metrics provided by TD Cowen reflect the company's ongoing efforts to reach profitability and enhance shareholder value.
InvestingPro Insights
As Virgin Galactic (NYSE:SPCE) navigates its path to profitability, investors and analysts closely monitor the company's financial health. Recent data from InvestingPro shows that Virgin Galactic holds a market capitalization of $440.16 million, with a notably high revenue growth of 251.91% over the last twelve months as of Q1 2024.
Still, this growth is set against a backdrop of significant challenges, including a gross profit margin of -767.52% and an operating income margin of -5657.85% for the same period. The company's stock price has experienced considerable volatility, with a 1-week price total return of -7.53% and a 1-year price total return of -76.25%.
InvestingPro Tips highlight that while Virgin Galactic maintains more cash than debt on its balance sheet, it is quickly burning through cash, which is reflected in its negative free cash flow. Analysts remain cautious, not anticipating profitability for the company this year. These insights could be vital for investors considering the company's long-term financial strategy and operational efficiency.
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