Virgin Galactic Ticket Prices Surge

Virgin Galactic Holdings Inc., which unveiled its fourth-quarter results on Tuesday, is on track to benefit from the increase in ticket prices, as highlighted by Truist Securities analyst Michael Ciarmoli.

Rising Ticket Prices Signal Success

In his recent note, Ciarmoli expressed confidence in the company's progress, noting a steady rise in ticket prices. "Interest in flying with Virgin Galactic and securing a spot at the front of the line are key drivers pushing ticket prices higher," he stated. A recent occurrence involving a vacancy on the Galactic 7 flight schedule for the second quarter of 2024 resulted in a sale at approximately $1 million, boosting the average revenue per seat to $800,000.

Ciarmoli elaborated on how this opportunity was presented initially to customers who had existing reservations to fly. "Virgin Galactic also decided to release a limited number of ‘referral seats’ for customers who had already experienced a flight and wanted to recommend someone," he added. These commercial seats were priced at $600,000, setting a new benchmark that the company views as the minimum level when ticket sales resume. Notably, previous spaceflight reservations by Virgin Galactic were priced at $450,000.

Galactic 07 Mission on the Horizon

The upcoming Galactic 07 mission will mark the final flight of Virgin Galactic’s Unity spacecraft before the company pauses commercial operations to focus on developing its new Delta-class spacecraft. Scheduled for the second quarter, Galactic 07 represents a key milestone for the future plans of Virgin Galactic.

Addressing Concerns and Moving Forward

During a recent conference call to review the results, Michael Moses, Virgin Galactic’s president of space missions and safety, provided an update on an investigation regarding an alignment pin that detached from the VMS Eve mother ship’s launching pylon. "The investigation process has been progressing positively," Moses reassured. This issue was brought to light during a routine postflight evaluation following the Galactic 06 mission last month and was promptly reported to the Federal Aviation Administration for further assessment. Moses emphasized that there would be no impact on the upcoming Galactic 07 mission in the second quarter due to this issue.

Virgin Galactic continues to navigate through challenges and capitalize on opportunities as it looks toward an exciting future in space exploration and tourism.

Virgin Galactic Faces Pin Issue, Reducing Price Target

In light of the recent announcement regarding an alignment pin issue on the last flight, Truist's Ciarmoli reassured that the matter seems easily resolved. However, due to the prolonged upcoming hiatus from revenue generation and uncertainties surrounding the launch of the Delta class, the price target has been lowered from $3 to $2. Truist maintains a hold rating for Virgin Galactic.

Delta Class Development On Schedule

CEO Michael Colglazier confirmed during a conference call that the development of the Delta Class spaceships remains on track, with ground and flight testing set to commence next year and commercial service expected by 2026.

Analysts' Evaluations and Long-Term Outlook

KeyBanc Capital Markets analyst Michael Leshock adjusted estimates following Virgin Galactic's fourth-quarter earnings and maintained a Sector Weight rating. Despite the capital-intensive nature of the operations, Leshock believes Virgin Galactic is well-positioned to lead in space tourism once operations are scaled. The company's focus now shifts towards scaling operations with the Delta class in the long term.

Financial Projections and Stock Performance

The 2024 free cash flow estimate has been revised slightly, with expectations for a burn of $516M. 2024 is anticipated to be a capital-intensive year to support the production of the Delta class fleet of spaceships. Long-term projections indicate a move towards free cash flow breakeven in 2027.

Virgin Galactic's stock witnessed a 9% decline on Wednesday following a 6.7% increase in Tuesday's session. Over the past three months, shares have fallen by 21.4%, contrasting with the S&P 500 index's gain of 11.3%.

Amid analyst evaluations, two recommend buying, five suggest holding, and four indicate an underweight or sell rating for Virgin Galactic.