What Branson jumping ahead of Bezos means for Virgin Galactic's stock

Published Fri, Jul 2 20212:48 PM EDT

Michael Sheetz @in/michaeljsheetz @thesheetztweetz

Sir Richard Branson decided to launch earlier than expected on Virgin Galactic's spaceflight schedule, a move that would put him in space this month just nine days before Jeff Bezos flies, but whether the surprise change makes sense for the publicly-traded space tourism company is a different matter. The billionaire announced the plans to launch on July 11, a month after Bezos announced he would fly on Blue Origin's first passenger spaceflight scheduled for July 20. Canaccord Genuity analyst Ken Herbert, whose firm has a buy rating on Virgin Galactic's stock with a $35 price target, said there there may be "a few other reasons besides just the ego" for Branson to launch before Bezos. But overall, he thinks ego is "the primary driver here." "For these guys, ego and being first and bragging rights are obviously pretty important," Herbert said. Virgin Galactic CEO Michael Colglazier denied that the company rearranged its spaceflight to get Branson to space before Bezos, telling CNBC on Friday that is "absolutely not" the reason. "We only fly when we've assessed all of our data and we are safe to fly and ready to fly," Colglazier said. While Herbert said he is unsurprised the company is not outright admitting that it's trying to win the billionaire space race, he noted that the move is characteristic of how Branson built his Virgin Group empire. "Branson is all about marketing and he's all about publicity and stunts and he's built a big part of his career and his wealth and his reputation around outlandish things and this clearly fits with that," Herbert said. The Canaccord Genuity analyst said he spoke to Virgin Galactic this morning and, given the company's prior comments about reopening ticket sales after Branson's flight, believes it will "start to sell reservations again" if the trip is successful. The company currently has about 600 reservations for tickets on future flights, sold at prices between $200,000 and $250,000 each. "There's the obvious benefit of maybe just generating some cash," Herbert said. "There's a lot they hope to build around it from a marketing standpoint that could be pretty powerful." Virgin Galactic's stock has soared more than 45% over the past month, with most of the gains coming after the company received FAA approval to carry passengers on future spaceflights . Above $45 a share, Wall Street's average price target means analysts see Virgin Galactic's stock dropping about 30% from current levels according to FactSet. But the company doesn't expect to start commercial service until early 2022, with it yet to generate significant revenue – which Bernstein analyst Douglas Harned emphasized in a note clients on Friday. "Unless we could see a broader business opportunity, we were unable to reach the high valuation held by the shares. One might have thought an Underperform rating would be most appropriate. We kept our rating at Market-Perform, because of the possibility of a major event," Harned wrote. Bernstein has a $31 price target on Virgin Galactic. – CNBC's Michael Bloom contributed to this report.

The flight crew of the company's fourth spaceflight test, from the left: Pilot Dave Mackay, lead operations engineer Colin Bennett, chief astronaut instructor Beth Moses, founder Sir Richard Branson, government affairs VP Sirisha Bandla, and pilot Michael Masucci.

Virgin Galactic