Virgin Galactic Valuation and Why I Bought It
Recently, I made a decision to buy Virgin Galactic $SPCE and I will share why.
I used a growth investor mindset instead of complicated Excel or number-crunching, as it is only useful if you invest a lot of money or has some form of control.
The market that I know right now feels very speculative or priced in. Tesla, Shopify, SEA Group, Carvana seems too optimistic to my liking. I still bought the SEA Group as they have a lot of good things going for them, especially in branding and market share penetration. But the purchase is definitely not cheap so I had to look for alternatives.
The recent NASA news with Virgin Galactic just gave me a signal. Everything is nonsense and speculative for Virgin Galactic now. SpaceX and Blue Origins are the only one and Virgin Galactic is an underdog now. I loved a simple and underlooked business.
As usual, I like to look at only 2 aspects of Virgin Galactic:
- Ability to survive/scale
- Usually, I look at the ability to scale but space tourism is not scalable. yet It is all about surviving till your first flight like SpaceX. They have around $480m and should last long enough till a first flight, regardless of economical feasibility in the future.
- CEO Richard Branson's ability to attract investment. Musk's overly optimistic timeline is called Elon time, I think Sir Richard Branson's time can beat Elon time easily given how much delay there was. Nevertheless, I think if anyone can attract space tourism, it will be Sir Richard Branson.
- Lack of competition in space tourism. Countries are focused on launching mini-satellites instead of space tourism. I think it is unlikely to change. Blue Origins is a competitor but I suspect they will focus on transactional numbers rather than customer experiences.
- Plans to be profitable by August 2021 and may be very profitable if it works. “What the team has built, and this is what was amazing to me, is a business that has software-like margins. This thing looks like a software business under the hood even though it’s flying people to space. This is, I think, a really compelling risk-reward,” Chairman Palihapitiya said. https://www.cnbc.com/2019/07/09/virgin-galactic-says-space-tourism-flights-to-begin-in-a-year-company-will-be-profitable-in-2021.html
- Contracts with NASA and other minor satellite projects. These projects are not the key but it helps in the survivability of the company.
- Ability to innovate
- It failed a few times already and I think it will improve eventually (my own optimism). I don't know rocket science or how well the team so I defer to the smartest man in Space now who said it was hard.
Sorry to hear that. Orbit is hard. Took us four attempts with Falcon 1.— Elon Musk (@elonmusk) May 25, 2020
Overall, I will just monitor Virgin Galactic and might buy more if I see its progress better. There is a cabin sharing end July to remind people it is still out there. I bought it because I have no coverage on it at all and don't see it too risky or going bankrupt yet.
Sky Hoon. Read Full Bio
Website Owner, Twitter-er
He has been trading since 2008. He started this blog to share the journey about option trading. He dabbled in stocks, bitcoin, ethereum (in Celsius Network), ETF (lazy Dollar Cost Averaging) and also built websites for fun. He used this as a platform to share my experiences and mistakes in trading, especially options which I just picked up.