© Reuters Virgin Galactic (SPCE) Slips as Bernstein Cuts to Underperform, Analyst Less Certain Business Will Succeed
By Senad Karaahmetovic
Shares of Virgin Galactic (NYSE:) are down 4% today after Bernstein downgraded to Underperform from Market Perform with a $4 per share price target, down from $7.00.
An analyst said the rating cut was fueled by the continuous delay of future flight operations, maintenance work on the platform, and a need to raise more funding as cash burn continues to rise.
“Since we launched coverage in early 2021, the first commercial flight for private citizens has been pushed back by two years to Q4 2023 and more than $1.2bn in cash has been raised in two equity rounds and a convertible bond offering,” he told clients in a note.
Moreover, the analyst also noted a difficult macro environment where higher interest rates are hiring valuations of early-stage companies.
“The fall in the SPCE share price makes the stock less attractive as a currency for share-based employee compensation. Future equity sales look to be highly dilutive,” the analyst added.
Even more worryingly, the analyst says he doesn’t see a “next thing,” a catalyst that could drive long-term growth in the 2030s.
“We now have less confidence in the success of this business. We previously saw potential for high operating cash generation, but with substantial risk. In our view, risks grew significantly during the last 18 months,” the analyst concludes.
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