Upgrades Signal a Potential Blastoff for Virgin Galactic Stock

Financial experts are smitten with SPCE stock and, it seems, space tourism in general

One thing I don’t recommend is buying a stock just because someone recommends it. Take Virgin Galactic (NYSE:SPCE) as an example. Really, the only valid reason to own SPCE stock is because you believe in the company and, more generally, in the future of space tourism.

That being said, it doesn’t hurt to have a prominent analyst backing a stock that you like. This can encourage us to hold on to our investments through thick and thin. Moreover, an analyst’s bullish call could also cause the stock price to go up.

In the case of SPCE stock, there are actually multiple financial analysts leaning bullish on it. However, it’s not enough to read about their upgrades and their price targets. Informed investors must dig deeper and understand why it’s a good idea to take a position in the stock.

A Closer Look at SPCE Stock

Interestingly, SPCE stock already had a couple of blastoff moments in 2020. Both times, the share price took off like a rocket but then soon came falling back down to Earth.

The first instance of this took place in February, right before the novel coronavirus pandemic reached the United States. It might be argued, then, that the drawdown after the price ascent wasn’t entirely Virgin Galactic’s fault.

That time, SPCE stock reached its 52-week high of $42.49. In July, SPCE popped to the $25.50 area but then dropped back down again. In general, the stock seems to be comfortable trading in a range between $14 and $20.

At the very least, the bulls have some price objectives to look forward to now. They’ll want to see SPCE stock break through $20 and then $25 with heavy trading volume. Only then can they realistically contemplate the $40 level.

Repeat Customers

Judging from his price target, Cowen analyst Oliver Chen appears to believe that SPCE stock will move higher.

To be more specific, Chen assigned SPCE a “buy” rating along with a price objective of $22. But this isn’t a typical bullish call. Chen’s price target comes with some fascinating research.

Through a survey that he conducted, Chen found that 78% of people with a high net worth and an interest in traveling into space want to go more than once.

To be honest, that’s an angle I hadn’t thought of. If the space flight experience is truly enjoyable, why wouldn’t the clients want to go again and again? For the ultra-wealthy, it could be like a kid going to a theme park, albeit much more expensive.

Space Invaders

If you can believe it, out of six analysts who cover SPCE stock, all six of them rate it a “buy.” That’s almost unheard of, especially for a company that’s really just getting started.

I really can’t blame them as Virgin Galactic is an early mover, or as I like to call it, a space invader. The company is gaining a foothold in an untapped market that’s not crowded yet, but might be someday.

Credit Suisse analyst Robert Spingarn recently raised his price target from $22 to $24. With that, Spingarn declared that Virgin Galactic “progresses toward commercial operations and looks to enter a period of positive news flow, which could drive multiple expansion.”

On the heels of Spingarn’s bullish call, UBS analyst Myles Walton initiated coverage of SPCE stock with a $25 price target. Walton projected, “We see Virgin Galactic as the only way for consumers to gain entry into the [roughly] 560 member astronaut club in the next five years.”

The Bottom Line

Clearly, the experts are optimistic on SPCE stock. If you listen to the analysts, you might come to the conclusion that Virgin Galactic is making early and aggressive strides into the largely untapped space tourism market.

That’s a perfectly reasonable conclusion to make. And if you happen to concur with the financial experts, it might be a good time to take a bullish stance yourself on SPCE stock.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.