On Friday, Bernstein SocGen Group maintained its Underperform rating on Virgin Galactic (NYSE:SPCE) with a steady price target of $3.00, representing significant downside from current levels. The firm's stance stems from concerns over the aerospace company's developmental progress and financial outlook, particularly regarding its Delta spaceships and the schedule for commencing commercial flights.
According to InvestingPro data, the company's financial health score stands at a concerning 1.18, labeled as "WEAK," with analyst targets ranging from $3 to $41.
The analyst pointed out that Virgin Galactic has historically missed its projected timelines. The inaugural commercial journey using the Unity spaceship was postponed from 2021 to the fourth quarter of 2022, and subsequently to the second quarter of 2023. Additionally, the Delta spaceship, initially expected to be in operation by 2025, has also faced delays.
Given these previous deferrals, the firm expressed skepticism about the company's ability to adhere to its 2026 target for launching commercial flights with the Delta spaceship. The analyst emphasized that the repeated delays in starting revenue-generating flights increase the discount on the company's cash valuation. Moreover, concerns were raised about liquidity risks and the valuation challenges posed by the absence of near-term stock catalysts, with no commercial flights scheduled between mid-2024 and the Delta's 2026 launch.
Virgin Galactic reported a cash balance of $744 million, but the company's ongoing cash burn is substantial. InvestingPro analysis highlights this as a critical concern, with the company burning through cash rapidly while maintaining a current ratio of 4.52. While SPCE anticipates reducing its cash burn rate to below $100 million per quarter by the end of 2025, the firm expects capital expenditures to remain high due to investments in a second-generation mothership, additional Delta spaceships, and a new spaceport. For deeper insights into Virgin Galactic's financial health and future prospects, investors can access comprehensive Pro Research Reports covering 1,400+ top stocks on InvestingPro.
The company has conducted equity raises in 2022 and 2023 to fund its operations and development. Most recently, Virgin Galactic announced a new up to $300 million at-the-market equity offering. The proceeds are intended to expedite the development of the second mothership and the third and fourth Delta ships.
With a market capitalization of just $203 million and revenue of $9.42 million in the last twelve months, the analyst cautioned that the company's cash outflows could increase if there are further delays in the Delta ships' or new mothership's timelines.
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In other recent news, Virgin Galactic has unveiled its financial performance for the third quarter of 2024. The earnings call, spearheaded by CEO Michael Colglazier and CFO Doug Ahrens, offered a glimpse into the company's financial status and future prospects. Forward-looking statements were shared, embodying both optimism and caution about the company's path, despite the inherent uncertainties of such projections.
The call also included a Q&A session, which provided further clarity on the company's performance and expectations. Virgin Galactic's leadership expressed a balanced outlook, acknowledging potential risks while also showing confidence in the company's direction.
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