Virgin Galactic (NYSE:SPCE) stock has significantly underperformed the broader markets so far this year. The shares of this aerospace and space travel company have declined approximately 50% year-to-date. While this penny stock has lost substantial value, analysts still hold a pessimistic view of SPCE stock. This suggests it is not the opportune moment to take a bullish position on Virgin Galactic stock, and hence it could be unwise to buy the stock at this time.
Here’s What’s Hurting SPCE Stock
Virgin Galactic has completed five human spaceflights in five months, which augurs well for growth. However, concerns around cash burn and profitability are taking a toll on its stock price.
Investors should note that the start of commercial flights is expected to add to its top line. Additionally, the company is making significant strides in the development of its Delta Class spaceships, which will drive revenue growth and profitability in the long run.
The company expects to deliver revenue of $1 million in Q3 and Q4, benefiting from commercial service. However, SPCE projects its free cash flow to be negative $120 million to $130 million in each of the third and fourth quarters of 2023.
Given the pressure on earnings, Bank of America Securities analyst Ronald Epstein reiterated a Sell rating on SPCE stock on October 3. Meanwhile, Goldman Sachs analyst Noah Poponak, who maintained a Hold rating on Virgin Galactic stock on August 4, said that SPCE’s “business model requires scale, which is dependent on the Delta class of ships that the company doesn’t expect to fly until 2026, making visibility limited over the next few years.” The uncertainty over pricing and margins is keeping Poponak sidelined on SPCE stock.
With this backdrop, let’s look at the Street’s consensus rating for Virgin Galactic stock.
Is Virgin Galactic a Buy, Sell, or Hold?
Virgin Galactic stock sports a Moderate Sell consensus rating on TipRanks, reflecting two Hold and three Sell recommendations. However, as SPCE stock has lost substantial value year-to-date, analysts’ average price target of $2.42 implies 38.29% upside potential from current levels.
Bottom Line
The start of commercial spaceflights is a prominent milestone for Virgin Galactic and will support its revenue growth. However, the company’s revenue and profitability depend on the Delta class of ships, which SPCE expects to enter into commercial service in 2026. Thus, SPCE stock could remain under pressure due to the near-term cash burn and lower visibility over future earnings.
While investors must exercise caution before investing in Virgin Galactic stock, they can utilize TipRanks’ penny stock screener to find other attractive penny stock opportunities.
