Virgin Galactic Holdings shares slide as losses widen

Sir Richard Branson speaks after he flew into space aboard a Virgin Galactic vessel © Getty Images

By Sam Boughedda,
Published by, 1 March 2023

Virgin Galactic Holdings (NYSE:SPCE) shares are trading lower early Wednesday after they missed fourth quarter earnings expectations.

The spaceflight company posted a loss per share of $0.55 on revenue of $870K. Analysts expected a loss per share of $0.51, however, revenue topped the $342.62K consensus estimate.

SPCE shares are down over 3% on the back of the report, adding to its over 36% decline in the last 12 months.

The company’s net loss widened to $151 million, compared to the $81M net loss in the fourth quarter of 2021. For the full year 2022, its net loss widened to $500M, compared to $353M in 2021.

Nevertheless, SPCE said its cash position remains strong, with cash and cash equivalents and marketable securities of $980M as of December 31, 2022.

Virgin Galactic, founded by Sir Richard Branson, said it remains on track to begin its first commercial flights in Q2.

Looking ahead, SPCE forecasted a negative free cash flow in the range of negative $135M to negative $145M.

After two recent test flights, Chief Executive Officer of Virgin Galactic, Michael Colglazier, said: “It is great to see our mothership back in the skies, and we are thrilled to have VMS Eve rejoin spaceship Unity back home at Spaceport America. With our enhancement program complete and validation flights underway, we remain on track to launch commercial service in the second quarter of 2023.”

Reacting to the report, Truist analysts reiterated a Sell rating and $3 price target on SPCE, telling investors that on the surface, SPCE management’s “messaging around the Eve Mothership and return to spaceflight operations in 2Q23 was solid, but commentary on FCF was anything but.”

“Cash burn in 2023 is likely to sustain its prior two qtr run rate implying a burn in excess of $500M. Additionally mgmt indicated that 2024 will now be the peak burn year implying two-year cash burn in excess of $1B against the co’s total cash/security balance of $980M,” wrote the analysts.

Wolfe Research analysts maintained a Peer Perform rating on the stock, stating in a note that “the reiteration of the 2Q23 start of commercial service should be a positive in the near-term, balancing out the obvious tension of elevated medium-term fcf burn.”

“The cash burn continued in 4Q22 and was broadly in-line with expectations with a modest further ramp expected in 1Q23. We are less clear on when/what is peak burn-rate, but it sounds like ’24 could be the peak year as new vehicle spend ramps,” explained the analysts.

“The company reiterated a pause on its Imagine spaceship in favor of concentrating efforts on Unity and Delta, and, importantly, reiterated their commercial service timeline for commencement in 2Q23.”

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