Virgin Galactic gets two more buy ratings as Wall Street remains unanimous on space tourism stock

Published Mon, Sep 28 20208:21 AM EDTUpdated Mon, Sep 28 202010:36 AM EDT

Michael Sheetz @in/michaeljsheetz @thesheetztweetz

(This story is for CNBC PRO subscribers only.) Virgin Galactic on Monday got its seventh and eighth buy ratings from Bank of America and Susquehanna, respectively, as the space tourism stock continues to have bullish recommendations by all the Wall Street firms that cover it. In addition to the two most recent recommendations, Virgin Galactic also has the equivalent of buy ratings from Morgan Stanley, Vertical Research Partners, Cowen, UBS, Credit Suisse and Alembic Global Advisors. "While Virgin Galactic is not yet operational, the company is gearing up to begin serving customers in early 2021. We believe SPCE's growth potential is unparalleled vs. our coverage and the current nascent stages of the company provide investors with a unique entry point into the stock," Bank of America analyst Ron Epstein wrote a note to investors. Shares of Virgin Galactic rose more than 21% in trading from its previous close of $16.34. Before the open, the stock was up more than 42% from the beginning of the year. Bank of America: Buy, $35 price target Bank of America's price target represents Virgin Galactic's stock more than doubling. Epstein sees buying shares as offering "investors the opportunity to get into a company at the very beginning of its growth story," he wrote. "The long-term opportunities in space tourism and hypersonic point to point travel are nearly revolutionary. No company in our coverage universe has anywhere near comparable growth potential," Epstein said. As the company describes itself, Virgin Galactic is "a luxury spaceliner" that doesn't have any operational competition, which Bank of America noted gives it the leading position in the nascent but growing space tourism market. The company's also vertically integrated, with its subsidiaries keeping production of its specialized vehicles in-house, which Epstein said is "a differentiator for Virgin Galactic." But buying Virgin Galactic's stock also comes with a few "high risk" issues, most importantly, the potential for a fatal accident, Bank of America noted. "In our view, this scenario is unlikely, but not a zero percent probability," Epstein said. An additional risk is its lack of revenue and that the company has yet to begin its commercial service. "Given that this company is a growth company in a nascent industry and is current unprofitable, there is little in the way of a proven record of financial performance. This makes it difficult to model and we acknowledge that our financial model incorporates a higher number of assumptions than our typical financial model. We have less confidence in our cash use or cash generation estimates vs. our other buy rated commercial aerospace and defense names. However, as the company is more of a concept-stock, we do not believe these estimates or financial performance in the next five years will be material drivers for the stock as much as it would be for a more mature company," Epstein said. Susquehanna: Positive, $20 price target Susquehanna sees Virgin Galactic's stock growth at more conservative 22%, but analyst Charles Minervino highlighted similar opportunities for the company. "While this is an untested market, we believe SPCE's offering will be tapping into significant latent demand for space tourism," Minervino said. "SPCE will enjoy a first mover advantage in a large and untapped market." Among Susquehanna's catalysts for Virgin Galactic's stock is the size of the market for people interested in what is considered a luxury experience. While ticket prices are expected to be more than $250,000 per person, Susquehanna believes there is the "potential for robust demand" from high net-worth individuals. There are more than 40 million people who have a net worth between $1 million and $10 million, the firm noted. Additional Susquehanna catalysts are Virgin Galactic's upcoming final test spaceflights , its first commercial flight carrying founder Sir Richard Branson , possible new contracts with government agencies, and further expansion of its operations at other spaceports. But his firm does not expect Virgin Galactic to deliver quarterly free cash flow until 2024, "which certainly serves as a fundamental risk," he said. Like Bank of America, Susquehanna also highlighted the risk of a fatal accident, as well as further development delays. "SPCE is still essentially at the pre-revenue stage of its growth cycle, despite having been founded in 2004. Visibility into the company's revenue growth remains fairly limited, while challenges related to COVID-19 could impact growth and future demand," Minervino said. – CNBC's Michael Bloom contributed to this report. Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.

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(This story is for CNBC PRO subscribers only.)

Virgin Galactic on Monday got its seventh and eighth buy ratings from Bank of America and Susquehanna, respectively, as the space tourism stock continues to have bullish recommendations by all the Wall Street firms that cover it.

In addition to the two most recent recommendations, Virgin Galactic also has the equivalent of buy ratings from Morgan Stanley, Vertical Research Partners, Cowen, UBS, Credit Suisse and Alembic Global Advisors.

"While Virgin Galactic is not yet operational, the company is gearing up to begin serving customers in early 2021. We believe SPCE's growth potential is unparalleled vs. our coverage and the current nascent stages of the company provide investors with a unique entry point into the stock," Bank of America analyst Ron Epstein wrote a note to investors.

Shares of Virgin Galactic rose more than 21% in trading from its previous close of $16.34. Before the open, the stock was up more than 42% from the beginning of the year.