UBS upgrades Virgin Galactic to buy, sees upside after a long sell-off and reset testing schedule

Virgin Galactic's spacecraft Unity glides in for a landing after a flight test in New Mexico on June 25, 2020.
Virgin Galactic

UBS upgraded Virgin Galactic's stock to buy from neutral on Friday, calling for clients to take advantage of an opportunity the firm sees with shares down nearly 70% from their February highs.

Virgin Galactic also "reset" its flight schedule, analyst Myles Walton wrote in the note, with the company avoiding a possible maintenance delay and preparing to fly its next spaceflight test on Saturday.

He said the "catalyst chain" for Virgin Galactic's stock to climb has been rebuilt, with the analyst seeing each upcoming milestone in its remaining test flight program as pushing the shares higher.

"Over the next four months, there should be three more powered [spaceflights] before a wholesome initiation of commercial service [expected in 2022]. Following the third flight, ticket sales should reopen, which we see as another catalyst into the fall," Walton wrote.

The second spaceflight test will carry four passengers to test the spacecraft's cabin, while the third test is planned to fly founder Sir Richard Branson.

The company's test flight program has been delayed substantially. The upcoming spaceflight is a redo of a December attempt that was cut short by an an electromagnetic interference issue, and the company's promised beginning of commercial service was pushed back from mid-2020 to early 2022.

Shares of Virgin Galactic, which jumped about 15% after Thursday's spaceflight announcement, rose 6.4% on Friday to close at $21.07.