Virgin Galactic's stock soars, fueled by retail investors

Cornelia Mascio
Febbraio 21, 2020

Image via Virgin Galactic's Facebook page.

Traders on Wednesday paid the equivalent of a 34% annual interest rate to borrow Virgin Galactic shares to make new short bets, reflecting a shortage in the shares due to its popularity among short sellers.

Fanning enthusiasm around space tourism on Tuesday, Tesla Chief Executive Elon Musk's SpaceX announced plans https://spaceadventures.com/space-adventures-announces-agreement-with-spacex-to-launch-private-citizens-on-the-crew-dragon-spacecraft to send up to four private citizens on an orbital voyage aboard its Crew Dragon spacecraft, launched on its Falcon 9 rocket.

Virgin Galactic is among a group of stocks that have rallied amid outsized options trading this week, spurred on by retail investors talking up their positions on message boards like r/wallstreetbets on Reddit.

Traders are shorting $18 billion worth of Tesla's shares, dwarfing overall short bets against Virgin Galactic. "We just think the share price could use a breather", Jonas wrote, maintaining his $22 price target.

The upward rally was initially fueled last week when Virgin Atlantic's SpaceShipTwo vessel was moved to the operational base located in New Mexico. The 90-minute flights are priced at $250,000 per ticket and offer a weightlessness experience for several minutes. Attached to its carrier aircraft, VSS Unity was flown from its manufacturing facility in California.

The stock now fully reflects a "highly successful space tourism business at scale, a moderately successful space tourism business with early credit for the hypersonic opportunity, or a combination of both", yet Jonas is unable to pinpoint any big thesis change, nor has there been any acceleration to the events since his December initiation.

Virgin Galactic itself claims to have over 600 reservations for space flights at the moment.

Helped by improved profitability, Tesla has seen its stock surge 120% this year, including a 7% jump on Wednesday. All three of the prominent analysts who cover Virgin Galactic, however, now see it as overbought with $19 per share as the median price target. Their median price target is $19, compared to Tuesday's price of $35.70.

UBS has estimated that the business of outer-orbit travel will become a $3 billion industry by 2030.

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