In October, British billionaire Sir Richard Branson rang the IPO bell for his space tourism company, Virgin Galactic, on the floor of the New York Stock Exchange (NYSE). Despite the company’s ground-breaking mission, investors’ lack of enthusiasm had tumbled Virgin Galactic’s share price more than a third by last Friday.
Until Wall Street finally took notice. On Monday, Morgan Stanley started covering Virgin Galactic stock and assigned it an “overweight” rating, saying the space tourism company’s share price could soar as much as 200% from its current level as it carries out a long-term plan to fly regular people into suborbital space and around the world at hypersonic speeds.
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“A viable space tourism business is what you pay for today… but a chance to disrupt the multi-trillion-dollar airline [total addressable market] is what is really likely to drive the upside,” Morgan Stanley analyst Adam Jonas, best known for predicting trends in the transportation sector, wrote in a note to investors, CNBC reported.
Morgan Stanley’s vote of confidence boosted Virgin Galactic’s stock price up by 16% on Monday and another 10% on Tuesday.
Last week, Virgin Galactic CEO George Whitesides said 2019 was marked by “milestone after milestone,” including raising $450 million in the October IPO, opening a major facility in New Mexico, conducting two successful test flights and securing a $20 million investment from Boeing. The company is expected to send its first commercial passenger into space next year.
“While some investors have described high-speed hypersonic P2P air travel opportunity as ‘the icing on the cake,’ we see hypersonic as both the cake and the icing, with space tourism as the oven,” Jonas wrote. “The shares feature biotech-type risk/reward where today’s space tourism business serves as a funding strategy and innovation catalyst to incubate enabling tech for the hypersonic P2P (point-to-point) air travel opportunity.”
Morgan Stanley is one of the three Wall Street banks that cover Virgin Galactic stock. The other two are Credit Suisse and Vertical Research Partners, both having given “buy” ratings to the stock. The average price target for Virgin Galactic among the three banks is $20 per share, representing an over 100% premium over the company shares’ current trading price.
