Virgin Galactic Shares, Um, Take Off

Virgin Galactic Shares, Um, Take Off

about 4 years ago2 mins

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Whatever billionaire entrepreneur Elon Musk can do, billionaire entrepreneur Richard Branson can do better. At least when it comes to their tech companies’ stock price.

What does this mean?

Shares in Branson-founded space tourism company Virgin Galactic jumped as much as 35% on Tuesday, despite no obvious news. The stock, which has traded in New York since October, has tripled so far this year – heading for orbit even faster than Musk’s automaker, Tesla, which has only doubled 🙃

More electric than Tesla (Source: Koyfin)
More electric than Tesla (Source: Koyfin)

It’s all very impressive for a company that has taken $80 million in deposits for future space flights – but is yet to carry a single celestial passenger 👨‍🚀

Why should I care?

Even compared to Tesla’s frothy shares, Virgin Galactic appears expensive. Using enterprise value-to-sales (EV/sales) multiples, Virgin is trading at 66 times next year’s forecast revenue – compared with Tesla’s 4.8x.

Virgin Galactic’s share price climbed to more than $38 on Tuesday, double the $19 average price target of the three analysts who cover it. One Morgan Stanley analyst said the gains look “to be driven by forces beyond fundamental factors.” The bank has an overweight (a.k.a. buy) rating and a $22 price target on the shares.

Virgin Galactic’s trip to the moon is certainly attracting attention – and detractors. Even as the stock has climbed, short sellers have borrowed more stock to bet on the price falling back to earth. Nearly a third of the company’s available shares are out on loan, according to S3 Partners, and this so-called short interest has climbed 23% in the past month even while the stock rallied 83%.

Branson in a pickle? (Source: S3 Partners)
Branson in a pickle? (Source: S3 Partners)

Following the rally, will Branson be tempted to follow Musk and issue new stock in his company to raise cash from eager investors?

Apply to join our Premium chats here and let us know your thoughts.

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