A Cynical Look at Virgin Galactic (SPCE) - Shooting to the Moon or a case of FOMO?
Updated: Jul 3, 2020
In the last few days we have seen Virgin Galactic’s (SPCE) stock take off like a spaceship. This stock has definitely caught my eye, so I decided to take a closer look at it. With Tesla (TSLA) multiplying its value in the last 6 – 8 months, will this follow the same trajectory? If SPCE manages to do even half of what TSLA has done, it would be remarkable, and I do not want to miss that boat again.
SPCE has gone from $15.64 to $30.30 in just a month. That’s a 93% appreciation in value. The question is whether it has the potential to go higher. With its Q4 2019 earnings call merely a few days away its worthwhile to read up on SPCE.
Normally when I want to understand if a stock will increase in value over time, I will go through its financials and annual report and compare its financials to similar companies in the industry. However, since Virgin Galactic is quite niche, its quite difficult to benchmark it against any other company. Additionally, it is a company that is not yet generating profits. Hence its value would be derived primarily from its fundamentals such as future plans and whether it is meeting the goals that it had set out to achieve.
So what else do we know about this company? Last week, they announced that they are one step closer to commercial operations with its SpaceShipTwo Unity going to New Mexico for final flight testings. There is really no other new information SPCE has provided that would explain such a surge in its stock price.
My opinion is that the climb started with speculators trying to get in early ahead of its earnings call next week, where they might be expecting some positive news. For a stock such as SPCE, any news that may push it towards commercial operations is bound to cause a surge in demand, and any adverse news would cause it to be otherwise. Hence, if next week’s announcements don’t have anything concrete, you can expect this spaceship to experience some turbulence. Another reason why I think the price for SPCE is going to keep increasing till its announcements next week is FOMO. The Fear Of Missing Out has led to many investors (including myself) to jumping on to Tesla. And not wanting to miss out on another potentially ceiling shattering stock, many might keep jumping onto SPCE.
Overall, I do not think I will want to put my own money into this because I cannot find a single fundamental reason telling me why this company will be generating profits in the future. However, having said that, there might be some short-term potential in SPCE over the next few days. What happens after their Q4 2019 results announcement is anyone’s guess. If it shoots up after that, I know I will definitely be feeling a lot of “FOMO”.
Disclaimer: This post should not be interpreted as investment advice as I am not a professional financial consultant. The objective of this blog is to share my experiences with others and receive feedback. I will provide links to my information sources to the best of my abilities, but the reader is responsible for their own due diligence