‘Everything going to plan’ at Virgin Galactic as ticket prices rise, Truist says


Virgin Galactic Holdings Inc., which reported fourth-quarter results Tuesday, is set to reap the benefits of rising ticket prices, according to Truist Securities analyst Michael Ciarmoli.

“Everything going to plan,” he wrote in a note released Tuesday, saying that the company’s ticket prices are moving incrementally higher. “Interest in flying with [Virgin Galactic] and jumping ahead in line are evidently driving ticket prices higher,” he said. “After a vacancy opened on the Galactic 7 flight schedules for [the second quarter of 2024], it was sold at ‘market price’ of around $1M, bringing the average revenue per seat to $800K for the flight.”

Ciarmoli explained that the opportunity was first offered to customers with existing reservations to fly. “[Virgin Galactic] has also recently sold a select few ‘referral seats’ as a service to customers who have already flown and wish to refer someone,” the analyst wrote. “The commercial seats were sold at $600K, which [Virgin Galactic] now views as the pricing floor whenever ticket sales reopen.” Previously, spaceflight reservations had been priced at $450,000 by Virgin Galactic.

Related: Virgin Galactic narrows losses, but the space-tourism stock drops

The Galactic 07 mission will be the final flight of Virgin Galactic’s

Unity spacecraft before it halts commercial operations to develop its new Delta-class spacecraft. Galactic 07 is scheduled for the second quarter.

During a conference call to discuss the results, Michael Moses, Virgin Galactic’s president of space missions and safety, said the investigation into an alignment pin that “detached” from the VMS Eve mother ship’s launching pylon “has been going really well.” The issue was detected after a routine postflight review following last month’s Galactic 06 mission and was reported by Virgin Galactic to the Federal Aviation Administration, which is conducting its own review. “We don’t anticipate any impact on Galactic 07 at all for quarter two,” Moses said.

“The recent announcement of an alignment pin issue on the last flight appears to be easily resolved, and the development of the Delta class remains on schedule,” Truist’s Ciarmoli said. “Despite the generally as-expected results, we are lowering our [price target] from $3 to $2 in a reflection of the prolonged upcoming hiatus from revenue generation and the unknowns related to bringing the Delta class into service.” Truist maintained its hold rating for Virgin Galactic.

Related: Virgin Galactic says pin ‘detached’ from mothership’s launching pylon, reports issue to FAA

During the conference call, Virgin Galactic CEO Michael Colglazier said that the Delta Class spaceships remain on track to begin ground and flight testing next year and commercial service in 2026.

“Following Virgin Galactic’s [fourth-quarter 202] earnings/our analysis, we adjust our estimates and maintain our Sector Weight rating,” KeyBanc Capital Markets analyst Michael Leshock wrote in a note released Tuesday. “Our long-term view remains intact as we believe [Virgin Galactic] is positioning itself well to be a leader in space tourism once operations are scaled, though this is capital intensive and likely several years away. [Virgin Galactic] has successfully established a monthly flight cadence with [its Unity class], and the focus is now on scaling operations with Delta class in the longer term,” he wrote.

“Our 2024 [free cash flow] estimate is reduced modestly to a burn of $516M (from $524M), given a lower baseline, consistent with management’s FCF guidance,” Leshock added. “We expect 2024 to be the most capital intensive year in support of the production of its Delta class fleet of spaceships. Longer term, we model FCF breakeven in 2027, before inflecting positively in subsequent years.”

Related: These are the space stocks to keep an eye on in 2024

Virgin Galactic’s stock is down 9% Wednesday after ending Tuesday’s session up 6.7%. The space-tourism company’s shares have fallen 21.4% in the last three months, compared with the S&P 500 index’s
gain of 11.3%.

Of 11 analysts surveyed by FactSet, two have a buy rating, five have a hold rating and four have an underweight or sell rating for Virgin Galactic.

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