What to Look For From SPCE

Key points to remember

  • Analysts estimate EPS at -$0.36 vs. -$0.39 in Q2 2022.
  • Revenue is expected to plunge about 50% from the same quarter a year ago.
  • The company plans to manufacture up to six spacecraft per year to fuel the growth of its space tourism business.

Virgin Galactic Holdings Inc. (SPCE), owned by billionaire entrepreneur Sir Richard Branson, last month announced plans to sharply increase production of space vehicles. The company will open a new plant in Arizona to produce up to six vehicles per year to fuel the growth of the company’s space tourism business. The additional capacity is crucial to Virgin Galactic’s goal of creating a sustainable revenue stream and ending years of losses.

Investors will focus on whether Virgin Galactic’s latest plans will improve its financial performance both in the near term and over the next few years when it reports fiscal second quarter results on August 4. 2022. Analysts expect the company to post another loss per share, which would be at least its 14th consecutive quarter of negative EPS. Revenues are also expected to fall.

Virgin Galactic has taken a number of steps in recent months to position itself for rapid growth from next year. As mentioned, the company said on July 14 that it plans to sharply increase production of space vehicles. And on July 6, Virgin Galactic announced its partnership with a subsidiary of Boeing & Co. to manufacture motherships, which carry the spacecraft to its exit at around 50,000 feet. The company also announced in late July that it was partnering with global luxury travel company Virtuoso to offer a limited number of Virgin Galactic spaceflight seats to Virtuoso customers.

Virgin Galactic has already started selling tickets to the general public for spaceflights, but it has pushed back the planned launch date for its commercial spaceflight services to the first quarter of fiscal 2023. Each ticket costs $450,000, one-third of which must be paid in advance as a deposit, with final payment to be made before the flight.

Shares of Virgin Galactic have underperformed the broader market over the past year. The stock briefly outperformed in the first week of August 2021, then continued a sustained decline through the end of January 2022. Since then, the stock has mostly traded sideways. Over the past 12 months, Virgin Galactic has posted a total return of -75.4% versus -6.8% for the S&P 500 as of August 2, 2022.


Commercial view.

Virgin Galactic revenue history

Virgin Galactic missed EPS estimates but beat revenue expectations in Q1 2022. The company reported EPS of -$0.36 versus -$0.55 in the same quarter a year earlier. It also reported revenue of $0.3 million, an improvement from zero revenue in the same quarter a year earlier. This marked the fourth straight quarter of revenue after recording no revenue in the previous four quarters. In its quarterly report, the company said demand for tickets for its space travel service remained strong with around 800 bookings.

In the fourth quarter of fiscal 2021, Virgin Galactic posted a loss per share of $0.31, the same as a year earlier. The company reported revenue of $0.1 million versus zero in the prior year quarter, but down sharply from revenue of $2.6 million in the third quarter of fiscal 2021. Despite the losses ongoing, the company highlighted in its quarterly report that its cash position remained strong with cash, cash equivalents and marketable securities of approximately $931 million at year-end.

Analysts expect mixed results when Virgin Galactic reports results for the second quarter of fiscal 2022. The company is expected to post another loss per share for at least the 14th consecutive quarter. Revenue is expected to fall 50% to $0.3 million from $0.6 million in the same quarter a year ago.

Virgin Galactic Key Stats
Estimate for the second quarter of fiscal 2022 Q2 2021 Q2 2020
Earnings per share ($) -$0.36 -$0.39 -$0.34
Revenue ($M) $0.3 $0.6 0

Virgin Galactic’s efforts to launch a viable space tourism business have suffered from mounting losses, delays to schedules and test flights, and regulatory issues since the company went public in October 2019. The company eventually received Federal Aviation Administration (FAA) approval for a full commercial launch license in June 2021, the first time the agency had provided a license to take customers into space.

Virgin Galactic made its first fully crewed spaceflight last year, which carried billionaire Branson as one of its passengers. Although the flight met its test objectives, which included cabin and customer experience evaluations, it violated the FAA. The agency temporarily grounded Virgin Galactic after learning that its spacecraft deviated from restricted airspace during its flight. Later, in September 2020, the FAA cleared Virgin Galactic to resume flights after the company agreed to make the required changes. The company originally planned its full commercial launch in the fourth quarter of 2022, but in May the company pushed that date back to the first quarter of 2023 due to supply chain issues and labor shortages.