Why Virgin Galactic Stock Crashed The Day After Its Successful Launch?
Analysis of Virgin Galactic Share Price Target - Richard Branson's Successful Flight
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Analysis of Virgin Galactic Share Price Target - Richard Branson's Successful Flight
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I don't have a position in SPCE.
DISCLAIMER: All of Tom's trades, strategies, and news coverage are based on his own opinions alone and are only done for entertainment purposes. If you are watching To'ms videos, please Don't take any of this content as guidance for buying or selling any type of investment or security. Tom Nash is not a financial advisor and anything said on this YouTube channel should not be seen as financial advice. Tom is merely sharing his own personal opinion. Your own results in the stock market or with any type of investment may not be typical and may vary from person to person. Please keep in mind that there are a lot of risks associated with investing in the stock market so do your own research and due diligence before making any investment decisions.
Hey this is tom, and you know i don't know a lot of people who are in their 70s, who would be willing to go into space like richard branson just did yesterday. The only other person i can think of is my grandpa and he's already asking me for a ticket. Obviously i can't afford the fee 250 000 a pop, but richard if you're watching this - and you want to take my grandpa into space. I'd be down he'd, be down.
Give me a call now on this serious note, we have to talk about what happened with virgin galactic. This is a huge story, a lot of hype, a lot of euphoria rightfully. So it's a huge event, but the real question for me here is: is this company for real? Is it or legit and in this video i'll give you the actual analysis of that beyond the high beyond the noise, whether this company at this price is a good enough investment for me now, stick around with me and i'll. Tell you my opinion.
Okay. So here's a little background. Just a month ago, the faa actually gave its approval for the first time for virgin galactic to take human beings into space. Now not a month goes by and richard branson, with his 70 year old ass is going up into space successfully, and we all watched it yesterday as the vss unity went into sub-orbital space 50 miles above sea level.
The stock price is going crazy about seven percent up in pre-market 153. Just this year. The stock is ballistic, but also a lot of short interest. So we actually have to take a look at the company, the business model and i'll give you my opinion.
So here's the story, so i think the virgin galactic story is very interesting and i think yesterday's flight is a pivotal event, because it divides the first 17 years from the next 10, 15 years or whatever. I think this was the end of the rd process and the beginning of the business process. Can these guys make this into a viable, sustainable business? That's the real question and in this video i'll show you why they may why they may not. What are the risks? What are the upsides and i'll give you enough tools to decide for yourself, because, like everything i say in my videos, this is just my opinion, which might be inaccurate might be wrong, might be completely the ramblings of a madman.
You have to do your own research and this video will give you good tools to get started and, as you know in my videos, i always give you the bottom line first and in this video i'll do the same thing for you and, as always, don't click. Nothing don't smash, nothing don't buy. Nothing! Don't subscribe to. Nothing.
Just give me your attention and before we go through the analysis, i always will give you the bottom line. First, that's what i do in every one of my videos, so the success of virgin galactic is dependent on one factor. Only one can this company create an affordable, safe, sustainable business, around space tourism, or rather sub-orbital space tourism, and the question is not so simple because it's not really affordable right now at 250 000 per traveler. However, that's not really out of the ordinary, because in flight commercial flight wasn't for the common man when it just started out. This was for millionaires. This was pleasure. This wasn't about being operational. Going to business meetings.
I mean people used to fly and spend a lot of money, get caviar and champagne. Nowadays, it's kind of funny to think about it as you're sitting crammed in your seat, and you hear people vomiting in the toilet, crying babies by the way, the guy who vomiting in my toilet is probably my grandpa, but i mean that's a whole different story. Why talk about it right now? Let's move on the whole idea of this that the prices of these tickets have to come down if they cannot. It's gon na be a big issue for this business because the 250 000, the pop, is going to be very tough to maintain.
But again this is just the beginning. The commercial flies are only scheduled to start next year, so they have a lot of time to ramp this up and actually get going now. I am concerned that this thing is becoming about ego rather than business. Jeff bezos is going up next week.
Richard branson just went up yesterday i mean, is this a coincidence, or is this a competition who has the bigger spaceship? I mean i don't know, and the real question here is not about who goes first, it's about. Can you guys make it into a sustainable business? So the real question you should be asking yourself, as a shareholder in this company or as a potential shareholder. Is this an ego competition, or is this an actual business idea that can work? Let me show you both arguments from both sides. So, first of all, how does this thing work from a layman non-engineer perspective reporting for duty, so you have a plane that takes the spaceship that docks into it 45 000 feet in the air.
Then it disengages it has its own rocket. That takes it vertically into sub-orbital space. It spins there about 10 minutes. Then it glides back to earth and basically lands like a regular plane.
That's the best explanation i can give you with my non-engineer brain sounds simple. I don't think so. Just ask richard: branson 2014 was a really tough year for him, where he had a massive crash that put everything on ice for seven years. So that's not really a simple execution, but it works yesterday.
We saw it work, so there shouldn't be any issues, especially with the faa being behind it right now. First of all, the good news there's definitely demand for this thing. Virgin galactic have already collected 600 pre-orders paid pre-orders they're, actually sitting on 83 million dollars of prepaid pre-orders for flight, so the demand is there. The supply isn't amazing, it's basically them and jeff.
Bezos company does not a lot of supply and there's plenty of 10 million net worth people that are interested in this, especially with the pace of ramp up, which is going to be quite slow. Now the company expects to get to about 300 350 flights per year, but this thing is gon na take five six seven years to get to that point. So the supply is definitely not amazing for the next five years. They have plenty of butts to put in these seats at 250. 000. A pop, that's a good supply and a good demand, and another positive thing is that they definitely clear the regulatory issues the faa gave them approval. They actually went into sub-operative space. They came back.
Everything works like a charm, all gucci, so it actually is possible. It's doable and they did it. That's a massive hurdle that has been cleared, and now it completely also changed. The narrative nobody's talking about the 2014 accident anymore, everybody's talking about what happened yesterday and that's good for the company for the pr for the business for the marketing.
It has actual monetary value. Now. The bad news is that this business is going to be very complicated. Very expensive to run not to mention the extremely high operational cost, massive capital expenditures, insurance costs up the wazoo.
Can you find anybody to insure this thing, not sure? But even if you are it's going to be insane, the policies are going to be so expensive. Oh, my god, not to mention regulator, risk not to mention actual operational risks. Just ask branson. We just spoke about it.
The 2014 accident almost killed this program entirely one accident and this company is done. It's a massive risk now. The other kind of concerning thing here is that the company is pre-revenue, it's not generating any revenue, it's sitting on about 600 million in cash, which is the burn rate for about a year for this company. So in a year it's gon na run out of cash, and it's gon na need more either from the shareholders or from branson.
Now branson is definitely good for it. We all know it, so i don't expect any liquidity issues, but the company is definitely pre-revenue and you're investing in an early stage company, even though they've been added for 17 years. That's just a thing you need to understand, however, they do plan to launch commercial flights as of 2022, which means more shekels will come in into the cash register generating actual cash flow, which is good. Also, the demand is there and you know the prices can actually go up, because we just saw jeff bezos auction of a seat for 28 million dollars for his spaceship, which is way more than the 250.
A pop richard branson is currently selling, so there is potential there for sure. The question is: do i want to invest in a business that generates zero revenue and is valued at 12 billion dollars with a 22 short interest, and that answer depends on one question: can space tourism evolve into an actual legitimate business? We know that the demand is currently there. We have 600 pre-orders for this company. We have one guy paying 28 million just to go out with jeff bezos. We know the demand is there, but how much of it is novelty and how much of it is sustainable? Over course of a decade, i'm not sure now, according to northern sky research, this is a 500 million dollar market by 2023 and 3 billion by 2030. So essentially, it seems like there's plenty of money in this game when you have only two companies battling for these clients. The question is: how operationally viable is this business? Can they actually execute 350 flights per year, which is the destination that branson has set out? I'm not sure it's a very complicated business to run if they can get it they're. Looking about 800 to 1 billion of revenues per year, which is plenty to justify the current valuation, the question then becomes operational.
Can they do it? And if yes, when can they do it 350 flights? It means a daily flight, it's very complicated. Now the other thing can they actually build long distance travel out of this, because it's much faster to go through suborbital space if they can another massive business, but nobody knows exactly when and that's the biggest problem. You have a lot of risk here, because you have a lot of unknowns and at 12 billion dollars with zero revenue, it's a little bit problematic. So here's my two cents, i think - with no revenue right now and for the next year to two years, with a lot of regulator, risk operational risk, capex, expenditures, insurance expenditures.
This company is facing a lot of challenges. It needs to get everything right in order to actually generate enough profits to justify the 12 billion valuation it's currently carrying at this price. I think for me there are better alternatives, but again, i'm not always right and i've been wrong plenty. So maybe that's one of those cases don't do anything because of me go and do the research for yourself decide for yourself and let's see what happens as always a huge shout out to the channel members and the patrons you guys are amazing.
Thank you. So much we'll see you guys in the next video.
Load the SPCE space ship up now before it rockets again !!! My best investment ever .Good news is imminent and just around the corner. Next august test flight and finalization of 500 share offering speaks volume and portends huge things coming soon so now is a great entry point before the crowd gets in
Simple answer: Because as soon as the CEO successfully completed his flight he released to the media the promised big announcement: the selling of $500 million worth of shares to raise money for various corporate expenses. What did you expect it would happen?
What would happen to the business if there is a crash? Or death of a customer? Sounds incredibly risky
Because its a company of thieves run by pos rich people with pos employees that screws over shareholders thats all this company has done the last two years, screw over the people who are funding this thing.
Starship is far and away the biggest competitive risk to either Virgin Galactic or Blue Origin’s space tourism businesses. It will be several years before it’s rated for a human flight, but once it is, SpaceX will be able to offer a far superior experience for a fraction of the price and still make money hand over fist. Since my time horizon is ~10 years, I can’t even begin to justify investing in direct competitors to SpaceX.
From this point of view, doesn´t also mean that the UFO we´ve encountered so far may actually ¨ Aliens tourist¨ visiting different planets in space?.
Virgin Galactic clients won't be Billionaires only, Universities doing research and other state-owned research centers from all over the world would be interesting in sending their people to carry out experiments in zero gravity. the main advantage is that they'll come back to earth the same day with their experiments' results.
This company is sht, cause his plane takes people to legal space , ie fake space . The flight done by RB was done by NASA in 1962! So there is no new innovative tech. Sure they updated 1960s tech but at this point this looks more like a really expensive Great Adventure's ride. Call me when there is space hotel or base in space and there's a company taking people there .
250k for a couple of minutes in space. What a joke. Look at the environmental impact for this little stunt you can brag about to your rich friends. Staggering in these times with all time high C02 levels, extreme climate temperature records, wildfires, floods and they go start a business like that. Horrible.
$250K to spend only 10 minutes floating in space? What a total and complete ripoff. This business is the equivalent of a pothead selling weed to his buddies so he can smoke for free.
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Tom you gave a good video describing the space stock but in your video you ne er explain why the stock plummeted down after they had a successful flight. Before the flight the stock was going up and up and now all of the sudden its crashing
Jeff Bezos auction off the seat for the FIRST flight after that no one is gonna pay that…..who wants to pay that much to be the second? I don't think this is a good interpretation of how much people will pay, my opinion, but people keep mentioning it
Richard or the company has already said that they will be able to fly anywhere in 4-5 hours, so there is talk about travel plans.
Great analysis, as usual. How about sending your grandpa into space, with a bottle of vodka? That could be interesting !
Yeah I have an issue with Space tourism itself. Currently it does seems like its mostly to attract millionaires and billionaires. While I do think think it will make profit when it launches and might have a service/ product life of like 5 years. I tend to see it as a bucket list just like climbing Mt. Everest. Most people who do climb it, do it to remove it from their bucket list and/or to have to claim that they did it at cocktail parties.
How many people actually go back to Mt. Everest for a second time or 3rd? Not many. I can only see Space Tourism viable if they manage to reduce to ticket so middle class can also tour space. But I honestly can't see Virgin Galactic manage to reduce to the $10k range. Even if they manage to R&D and make it cheaper, my guess estimate would be at the $250k range and that is being generous with them and have everything go their way.
Right now the only one trying to solve the cost to weight ratio of putting stuff into space is Elon Musk.
To get successful in life, one need to spend less and invest more, you don't spend 90% of your earnings, than invest 10% and except financial growth. A saying goes, "what you eat dies but whatever you invest live forever".
Civil aviation is already a big problem (one of the main sources of climate disrupting gases). If in addition to that now we get mass "space" tourism, I think humankind (except maybe a few billionnaires) is toast. What a mess.
Here is my 2 cents why haven't they been putting satellites in orbit with the same method Branson puts tourist ,maybe that's the leaker and the stock drop
Blue Origin looks like a dick that Bezos is. Lol. All ego. Which gives me a bad feeling with Bezo flight.
The market realized that the potentially reliable base of costumers, flat earthers, don't have money.
well, in comparison with bo: it's like a plane (actually not even that) vs. a real rocket, it's visually very polluting with no next-gen on the horizon. on the other hand it's not weird shaped. i would guess this will be a niche as soon starship goes operational. also they were not really confident, as the "live" stream with engine ignition started as soon the engine was already shut off… so when the riskiest part was over. don't see the business case, also not with launcher one due to starship… my 2 cents.
Hi Tom the real reason it crashed was the stock is tied to the laws of physics.
The SP rises as it prepared for take off and drops when it lands.
220k$ for a flight in near space? That'll be about the price of a ticket to mars… It can't be sustainable.
The margin of safety I think will be a big problem. At these speeds, risks are high. Even if the chance of a bad event and death being .1-1%, that means ~100 flights before a bad event, which would lead to 100% mortality and shut down the program.
Lucky that Branson didn't have me putting the fuel in his toy. Knowing he was aboard, I would have put in a few extra kilos in the hope that his contraption continued upwards – never to return
Short answer : no, they can't scale. The only business model that could possibly justify their current valuation is supersonic travel and that's not what they're focusing on or will be for years to come. And it's not like they have a great track record of speed and efficiency that should make us confident in their ability to pivot to a whole new architecture. Please people, don't fall for the hype.
The real question is do i want to spend that kind of money and go to space for 10 minutes? Lets face it it would suck to al of a sudden need to take a dump and miss the whole 10 minutes on the toilet if theres even a toilet not to mention health risks and so on well see how this works i have my own opnion on these types of things and personally i think its insane
Hi Tom,
I appreciate your videos! As the #1 SPCE stock YouTuber I would like to challenge a couple of your points:
1. No Revenue
That’s wrong. Already on the last two flights they brought NASA payload up. That will be about $1M+ revenue in Q2 (depending which quarter they calculate it)
2. Crash
The crash was a pilot mistake. Not an engineering one. It won’t happen anymore. But let’s challenge this further: since the crash of SpaceX rocket how many crashes they had? (Except expected crashes of starship!) even more: that said, imagine during the first years of commercial travel that they would stop commercial airline travel. Won’t happen.
3. Profitability
This business has a 70% profit margin that is SAAS like! Source: Chamath Palihapitiya & his social capital DD team
4. Demand
The challenge is scaling of operations. They can for years sell ticket for $500k+ at this demand. With the ticket sales re-opening very soon proofing it.
I hope that makes a clearer picture for every viewer!
Thanks for this video Tom!