This is what analysts are saying about Virgin Galactic’s quarterly report: ‘Longer wait for cash flow’

Published Fri, Aug 6 202110:19 AM EDT

Michael Sheetz @in/michaeljsheetz @thesheetztweetz

Virgin Galactic reported second-quarter results on Thursday evening, with Wall Street having mixed views of the space tourism company's announcements of reopening ticket sales while further delaying the beginning of commercial service. Bernstein analyst Douglas Harned expects demand for the company's spaceflight tickets, now selling for $450,000 per seat and up, will "significantly exceed supply for the next few years." But Harned said the delay of commercial service to the second half of 2022 means "a longer wait for cash flow." Shares of Virgin Galactic rose nearly 12% in trading on Friday from its previous close of $31.53. "Another pushout of commercial service is a clear negative as now would be the time to capitalize on customer enthusiasm," UBS analyst Myles Walton wrote in a note to investors. Here is what major analysts are saying about Virgin Galactic's results, along with the firms' ratings and price targets. Morgan Stanley's Kristine Liwag: Equal-weight, $25 "We are encouraged to hear more details about the enhancement of Eve (mothership) as well as plans for Delta (spaceship) production. However, the path to commercial scale is steep. Currently, Virgin Galactic still has only one operational mothership and one operational spaceship (Unity) … We view the positive media momentum to result in a temporary step-up in ticket prices. We forecast that Virgin Galactic could book 1,110 passengers at $450k." UBS' Myles Walton: Neutral, $38 "Positives in the print: $450k ticket price and time between flights … Negatives in the print: pushout of commercial service, fleet limitations. Another pushout of commercial service is a clear negative as now would be the time to capitalize on customer enthusiasm. Additionally, the op tempo is hampered by the limitations of the existing fleet … Increased op tempo (and pax capacity and we believe clearing the von Karman line) hinges on the production and deployment of the Delta class which we think could be 2+ years away from entry into service." Bernstein's Douglas Harned: Market-perform, $31 "We would not expect Delta to enter service before 2024 … The challenge is to work through the existing 600 passenger backlog as flight capacity ramps slowly. Without the Delta model coming in to raise volumes, it could take until after 2024 to start flights with more capacity. It is not clear what this delay will mean for new ticket sales, although we continue to see demand as likely to significantly exceed supply for the next few years. But, getting high priced new tickets utilized, including those for scientific microgravity experiments, will take time. It is not clear what effect a delay will have on demand." Canaccord Genuity's Austin Moeller: Buy, $48 "We consider the price increase to be relatively reasonable, with the quoted $450k coming in below the $500-$600k estimated in many news reports … While the push to the right of additional customer spaceflights is somewhat disappointing, we view the company's new focus on improving the efficiency of the existing spaceships and scaling up the Delta-class fleet as a prudent strategic decision. 2022 was likely to feature only a token number of customer spaceflights anyway. With a higher launch rate for Unity and Imagine and a new fleet of vastly more capable spaceships and motherships, Virgin Galactic will be much better positioned to ramp up EBITDA and free cash flow generation over the course of the decade." – CNBC's Michael Bloom contributed to this report.

Sir Richard Branson waves out the window of spacecraft VSS Unity before launching on July 11, 2021.

Virgin Galactic