Virgin Galactic shares have gone absolutely parabolic today … so what happened?
This past Saturday, on a hot day in New Mexico, a glistening rocketship burst out of the atmosphere of the arid southwestern desert and traveled 55.45 miles into space.
No, this wasn’t a UFO or a sign of alien life, but rather the recent crowning achievement of British business magnate Richard Branson.
The launch was the handiwork of Branson’s commercial spaceflight company Virgin Galactic (NYSE: SPCE), which finally completed the major milestone of discharging their first successful human-operated test flight, directly from their private spaceport in Albuquerque.
This came after several months of internal setbacks, and since the beginning of 2021, the only thing more volatile than the flight schedule has been the share price.
This week appears to be no different, except that the price direction has made a dramatic pivot to the upside.
On Monday, May 24, shares of $SPCE traded as high as $27.20 at time of writing — 28% higher than the close on Friday, May 21.
And Monday’s high put $SPCE a whopping 87% off the low of $14.27, seen on May 11.
Always a fan favorite on the WallStreetBets subreddit, $SPCE climbed the “most mentioned equities” tracker on SwaggyStocks to the top position today, indicating that retail investors are excited about the success of the launch.
But now that Virgin Galactic has proven they can do what many short-sellers have doubted for years … is it a good time to trade the $SPCE odyssey?
A Bumpy Ride
Throughout 2021, Virgin Galactic shareholders have watched their money fly around on a proverbial spaceship, as share price volatility has been astronomical.
The company has faced criticism ever since 2014, when their SpaceShipTwo aircraft blew up in mid-flight, killing one pilot and seriously injuring another.
After going back to the blueprints and completing subsequent successful test flights, Virgin Galactic decided it was time to go public. But instead of going the traditional IPO route, Branson opted to join forces with Chamath Palihapitiya in a special purpose acquisition company (SPAC) deal.
Often cited as the SPAC deal that inspired a veritable market phenomenon, Palihapitiya’s reverse merger was a monumental moment in the new industry of special purpose acquisition companies.
Virgin Galactic debuted under its new ticker $SPCE at $10 on October 28, 2019.
By mid-January, shares had doubled in value to $19.99 before chugging even higher, eventually reaching 2019 highs of $42.49 on February 19, 2019.
This move drew the attention of the entire stock market.
Many doubted the potential of Branson and Palihapitiya’s venture, but by mid-February shares were up nearly 300 percent and the screams of critics had quelled into whispers.
The public market was signaling one thing only — insatiable enthusiasm about the booming space tourism company.
But a disappointing earnings call would prove to be the death knell for the ascending shares of Virgin Galactic.
In a moment all too familiar to traders — as soon as the Q4 2019 call started, the price began to plummet.
No profit, no guidance, and shaky scheduling comments from former CEO George Whitesides caused the shares to enter a protracted downtrend.
Before long, SPCE shares were below where they debuted, hitting lows of $9.06 on March 18, 2020.
For the next eight months, shares of Virgin Galactic pinballed almost exclusively between $14 and $27 — a near-perfect case study in range-boundedness.
It wasn’t until the tail end of 2020 that sentiments around $SPCE shares began to improve.
The Reddit/GameStop mania was in full swing, and with $SPCE having massive short interest at the time, it was immediately identified as a prime target for a short squeeze.
In a near-perfect repeat of the move that happened two years earlier (almost to the day), $SPCE shares boosted from $17.14 to $62.80 between November 1 and February 4.
But when the overall market conditions changed and heavily shorted stocks stopped running upwards, Virgin Galactic resumed its downtrend.
The company’s technical woes continued to plague the share price. On December 12, Virgin Galactic aborted a test flight mid-air due to a computer malfunction, exacerbating the concerns of traders.
Yet another earnings miss on February 25 added fuel to the shorts, and since the report the price has steadily declined, reaching lows of $14.27 last Tuesday.
But the biggest blow yet came as a major surprise to shareholders. On March 5, early investor and SPAC cheerleader Chamath Palihapitiya sold his entire personal stake in the company, worth some $213 million.
Dizzy yet? It’s remarkable how bumpy Virgin Galactic’s ride has been since going public. This brings us to today — when the company’s fortunes seem to be shifting for the better.
The “Picture Perfect” Test Flight
Much changed over the weekend, as Virgin Galactic’s first manned spaceflight on Saturday was a massive success.
The launch was “picture perfect,” recently appointed CEO Michael Colglazier told The Verge.
The test flight was the first to utilize the company’s new digital controller, meant to improve pilot handling of the aircraft. “This was our first run with it under full power, and it was flawless. Spot on,” Colglazier declared.
Colglazier’s remarks hang in stark contrast to past comments from predecessor George Whitesides, the former CEO who was seemingly always scrambling to explain away the company’s endless chronological delays, technical malfunctions, and logistical disappointments.
On their May 10 earnings call, the company made clear its intentions to conduct two more test flights before the end of 2021. The next test plans to carry two pilots and four employees, while the third and final flight this year will house none other than enigmatic founder Richard Branson.
If this happens, and later this year Richard Branson is launched into the stratosphere on a live stream, it will undoubtedly be a major catalyst for Virgin Galactic shares.
But as exciting as Saturday’s milestone is, we’ve seen in the recent history of the company that there are still many hurdles to overcome and volatility will likely be elevated in the coming weeks.
Traders shouldn’t necessarily rush into buying at the top of the week, but consider waiting for a dip or attractive buying opportunity and approach entries with caution.
As Branson said in his popular 2018 “A Letter to My Grandchildren” video, “I used to think of space as a destination, now I think of it as a journey.”
Feature Cover image: xalien / Shutterstock.com