Virgin Galactic stock falls after test flight delays push back debut of space tourism service

Preflight operations underway on the corporate’s SpaceShipTwo automobile Unity and mothership Eve.

Virgin Galactic

Virgin Galactic shares fell in buying and selling on Friday after the corporate’s fourth quarter outcomes revealed delays to its test flight program, with the anticipated launch of its business service now pushed to 2022.

The space tourism firm reported a quarterly loss that was inline with what Wall Street analysts had been anticipating, however the subsequent spaceflight test of its SpaceShipTwo automobile “Unity” was pushed from February to May. The firm discovered an electromagnetic interference challenge with a brand new flight management pc on Unity, with CEO Michael Colglazier saying the corporate expects corrective work will take eight to 9 weeks.

The delays to Virgin Galactic’s spacecraft testing program, which was beforehand setback after an in-flight engine abort throughout a spaceflight try in December, brought about the corporate to push back its schedule for starting common space tourism flights.

Shares of Virgin Galactic fell as a lot as 15% in buying and selling, to close $35 a share, after Thursday’s shut of $42.24. The stock stays up considerably for the reason that starting of the yr, gaining about 60% yr up to now even after Friday’s drop.

The new 2021 plan

Colglazier gave traders an up to date overview of the milestones Virgin Galactic expects to succeed in this yr given the testing delays.

The firm’s subsequent main occasion is not going to be with Unity, however somewhat characteristic the rollout of the second spacecraft in Virgin Galactic’s fleet – and the primary of its SpaceShip III era. Colglazier stated the SpaceShip III automobile options “a modular design” with “enhanced fabrication and assembly processes,” which the corporate expects will unlock “better performance in terms of flight rate” and upkeep.

In the meantime, this spring Virgin Galactic will work to repair the electromagnetic interference (EMI) challenge with Unity. The firm’s evaluation confirmed EMI as the foundation trigger of the December flight abort, and additional EMI points throughout pre-flight preparations brought about Virgin Galactic to face down from a spaceflight try that was anticipated earlier this month.

“To reduce the EMI levels, we will be enhancing the new flight control computer with additional features. Once we complete these modifications, we’ll thoroughly test the system on the ground, both in the lab and on Unity, following which we will recommence our flight test program,” Virgin Galactic president Mike Moses stated on the corporate’s earnings convention name.

Unity’s flight try in May will successfully be a repeat of the December test, with solely two pilots on board.

In the meantime, Virgin Galactic expects the primary SpaceShip III automobile “will begin glide flight testing this summer,” Colglazier stated. Additionally, the corporate will start meeting on a second SpaceShip III automobile.

“Our current flight test protocol for the first SpaceShipThree vehicle calls for four glide flights and four powered flights, and we expect the spaceflights will be revenue producing,” Colglazier stated.

Given Unity’s delays so far, Coglalzier declined to offer particular goal dates for the second spaceflight try, saying solely that Virgin Galactic expects it would “occur this summer.” The second Unity spaceflight will carry 4 passengers together with the pilots – the most individuals Virgin Galactic could have flown without delay.

Then Virgin Galactic will fly a 3rd spaceflight test, with Unity carrying firm founder Sir Richard Branson on a visit practically 20 years within the making.

The firm additionally added a fourth spaceflight test for Unity underneath a partnership with the Italian Air Force. Colglazier stated the flight will carrying three passengers and a number of analysis payloads, that includes as “suborbital astronaut training” for the Italians. That flight is predicted “to occur in late summer or early fall,” Colglazier stated, and can conclude Unity’s flight testing.

Then Virgin Galactic will start a interval of upkeep downtime that Colglazier expects will final about 4 months. The firm will conduct an “analysis and refurbishment period” with its service plane Eve, spacecraft Unity, and SpaceShip III autos.

“We’ve decided to implement enhancements and accelerates of long-term maintenance updates to our mothership Eve, that will improve the predictability and frequency of flight rate,” Colglazier.

Given the downtime, Virgin Galactic now expects that “Unity will begin flying private astronauts” in early 2022 – which can mark the start of the corporate’s business space tourism service. The firm final expects that “SpaceShip III will be in a position to complete its flight testing” early subsequent yr, Colglazier stated.

Wall Street cuts expectations

Multiple analysts adjusted expectations for Virgin Galactic’s future outcomes, reducing outlooks given the testing delays.

“The big news flow out of the print was the re-baselining of the flight schedule,” UBS analyst Myles Walton stated in a be aware to traders.

UBS has a impartial score on Virgin Galactic, reducing its worth goal to $40 a share from $52 a share. Walton stated he sees “a bit more technical risk on the schedule than previously,” though he was “encouraged by the speed in building a foundation for scale when the green-light on commercial ops is achieved.”

Alembic Global Advisors downgraded Virgin Galactic to impartial from obese, with its worth goal shifting to $39 a share from $27 a share.

“What drives our downgrade is a combination of the shares’ current valuation (the stock has risen 78% YTD after more than doubling in 2020) and a new outlook from management that seems to posit additional capital spending and a longer time to achieve regular-way consumer passenger trips, which now seem to us to be on an early-2022 time line,” Alembic analyst Pete Skibitski wrote in a be aware.

Credit Suisse analyst Robert Spingarn additionally adjusted his agency’s worth goal on Virgin Galactic to $42 a share from $36 a share in mild of the stock’s robust efficiency to start the yr.

“The updated plan, which relies on higher numbers and newer versions of the spacecraft, likely takes longer to build out than that which we contemplated when we launched coverage,” Spingarn stated.

Credit Suisse pushed back its forecast for Virgin Galactic attaining a excessive quantity of flights from Spaceport America in New Mexico to 2025 from 2024. Spingarn additionally famous that Virgin Galactic “seems content” with about 11 quarters of money left in its runway, based mostly on the present quarterly burn price.

“We now have a higher capex line which may require additional capital by the end of 2022 depending on the pace of further progress and burn rate,” Spingarn famous.

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