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.