Sell Virgin Galactic as it delays space tourism flights and burns through cash, Truist says

Published Fri, Aug 5 20227:53 AM EDTUpdated Fri, Aug 5 202210:20 AM EDT

Sell shares of Virgin Galactic as the space tourism company continues to push back commercial flights and burns through cash, Truist said in an analyst note Friday. Analyst Michael Ciarmoli downgraded shares of Virgin Galactic to sell from hold, citing a disappointing second-quarter report. The company postponed commercial flights to the second quarter of 2023. It also reported a net loss of $111 million, more than the $94 million net loss it posted the prior year. "Mgmt again delayed the return to commercial flight operations (now 2Q23) while also announcing that the VSS Imagine test flights have been pushed into mid-'23 pointing to operational flights in '24," Ciarmoli wrote in the note. Ciarmoli expects Virgin Galactic will burn through the $1.1 billion cash it has on hand by the third quarter of 2024, the note read. The space tourism company is seeking to sell up to $300 million worth of shares as R & D expenses are expected to "continue at or above current levels." "We believe that as one of the first market entrants, with proprietary technology, vertically integrated operations, and plans for a consumer-oriented experience leveraging the Virgin brand, SPCE is uniquely positioned to capture share in the emerging commercial space tourism industry," Ciarmoli wrote. "However, the timeframe for commencement of commercial flight operations has continued to slip and we believe that with the elevated cash burn associated with the company's plans to scale its operations, further dilutive equity offerings are likely," he added. The analyst also cut his price target to $5 from $8. The new price target implies nearly 39% downside from Thursday's closing price of $8.19. Shares of Virgin Galactic dropped more than 14% in Friday premarket trading. Other Wall Street firms were also unimpressed with Virgin Galactic's earnings report. Wells Fargo maintained its sell rating and cut its price target to $3.25 from $4. Canaccord Genuity kept its hold rating and lowered its price target to $7 from $8. — CNBC's Michael Bloom contributed to this report.