Retail Investors Bet Heavily on Virgin Galactic’s Space Travel

Marco Green
February 21, 2020

Following yesterday's rally, Virgin now records a more than 400% increase in the stock market since early December.

Shares of the company backed by billionaire Richard Branson have taken off in popularity among individual investors in recent sessions, almost displacing Tesla Inc, another favorite among non-professional investors.

While many analysts like the space tourism company's long term prospects, they warn that the stock has become overbought, with a median price target of $19 per share compared to Wednesday's price of $30, according to Reuters.

Traders on Wednesday paid the equivalent of a 34% annual interest rate to borrow Virgin Galactic shares to make new short bets, reflecting a shortage in the shares due to its popularity among short sellers. The data also highlighted around 70% of the traders holding a buy position in its stock.

Virgin Galactic is a staunch competitor of SpaceX (Tesla's subsidiary) and Blue Origin (Amazon's subsidiary) in the space tourism niche.

Jonas, who called for a breather in Virgin Galactic's rally just two days ago, expects the stock surge will prompt questions on the company's earnings call next week on whether it will raise capital. Total options volume in Virgin Galactic Wednesday was more than 4 times its 20-day average, Plug Power Inc.'s was more than 10 times its average, and Fuel Cell Energy Inc.'s reached 3 times its average. Appreciating Virgin Galactic's performance, Stanley still kept his price target of $22 on its stock. The 90-minute flights are priced at $250,000 per ticket and offer a weightlessness experience for several minutes.

Shares have continued to surge recently, amid optimism about Virgin Galactic's plans to launch a commercial space service to bring tourists into space: The company announced last week that it had relocated its SpaceShipTwo suborbital place to its commercial headquarters in New Mexico for final stages of test flights. Spaceport America is a commercial spaceport that is specifically created to perform the final stage test flights, as per Virgin Galactic.

UBS has estimated that the business of outer-orbit travel will become a $3 billion industry by 2030. All three of the prominent analysts who cover Virgin Galactic, however, now see it as overbought with $19 per share as the median price target.

Other reports by Click Lancashire

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