Why Virgin Galactic stock fell 10%

Following the successful launch of the Galactic 05 space tourism flight last November, the space company virgin galactic (SPCE -10.61%) I took the month of December off. But on Wednesday, Virgin announced that spaceflight would resume in the new year, with Galactic 06 launching around January 26, 2024.

Now the strange thing is that when Galactic 05 was released, Virgin Galactic stock immediately rebounded 10%. Virgin Galactic stock is down today. Under 10.8%.

What’s wrong with Virgin Galactic?

So what’s going on? You’d think investors would consider it good news that Virgin Galactic plans its first spaceflight of the new year in 2023, after six successful launches in six months. However, investors seem to be a bit perplexed.

why? In a press release, Virgin Galactic confirmed that Galactic 06 will only carry four paying passengers. That’s one more than the previous flight, but two more. less Than Virgin said it was originally designed to carry the VSS Unity spacecraft.

So investors are crunching the numbers and wondering how the four passengers aboard Galactic 06 (who pay up to $250,000 per ticket and generate $1 million in revenue for the company) will offset $300 million in operating costs. There may be. ($50 million per month) Virgin Galactic has been profitable for the first few quarters of 2023.

What’s wrong with Virgin Galactic?

And that’s a good question to ask. However, it’s worth pointing out that in the company’s most recent reported quarter, the third quarter of 2023, Virgin Galactic managed to reduce operating expenses from an average of $150 million per quarter in the first half of the year to just $90 million.

Of course, these are far more expenses than the company brings in in revenue. A launch cycle of one flight per month or three flights per quarter would result in Virgin Galactic spending $87 million more per quarter than it brings in in tourist flight revenue. but it is is development.

Personally, I don’t see how Virgin Galactic will be able to successfully offset all of its costs over the next few years and achieve flight cadences to a level that will allow the company to break even, much less profit. But I won’t say Can not wake up. If Virgin Galactic succeeds in continuing to reduce operating costs while expanding its revenue base, it’s at least a theoretical possibility that the company will eventually turn a profit.

We hope Virgin Galactic continues to make progress on this issue in the new year.