Virgin Galactic (SPCE) falls after test delays repel tourism media

Virgin Galactic shares fell in trading on Friday after the company’s results in the fourth quarter showed delays in its test flight program, with the expected launch of its commercial service now being pushed to 2022.

The space tourism industry reported a quarterly loss in line with what Wall Street analysts had expected, but the next spacecraft test of its SpaceShipTwo vehicle ‘Unity’ was pushed from February to May. The company found a problem with electromagnetic interference with a new flight control computer at Unity, and CEO Michael Colglazier said the company expects the corrective work to take eight to nine weeks.

The delays in Virgin Galactic’s spacecraft test program, which was earlier dropped after an engine crashed during a space flight effort in December, have the company rescheduling its schedule to begin regular spaceflight flights.

Shares of Virgin Galactic fell 11.9% on Friday to close at $ 37.23 a share. The share has remained significantly higher since the beginning of the year and has risen more than 55% so far, even after the fall of Friday.

Colglazier has given investors an updated overview of the milestones Virgin Galactic is expected to reach this year due to the delays in the test.

The company’s next big event will not be with Unity, but rather the launch of the second spacecraft in Virgin Galactic’s fleet – and the first of its SpaceShip III generation. Colglazier said the SpaceShip III vehicle has a ‘modular design’ with ‘improved manufacturing and assembly processes’, which the company expects to offer ‘better performance in terms of flight rate’ and maintenance.

Meanwhile, Virgin Galactic will be working this spring to resolve the issue of electromagnetic interference (EMI) with Unity. The company’s analysis showed EMI as the main cause of the flight crash in December, and further EMI issues during pre-flight preparations led Virgin Galactic to abandon a spaceflight effort expected earlier this month.

“To lower the EMI levels, we are upgrading the new flight control computer with additional features. Once we have completed these modifications, we will thoroughly test the system, both in the laboratory and in Unity, after which we will restart our flight testing program,” he said. the president of Virgin Galactic, Mike Moses, said.

Unit’s flight effort in May will effectively be a repeat of the December test, with only two pilots on board.

Meanwhile, Virgin Galactic expects the first SpaceShip III vehicle to “launch the glider this summer,” Colglazier said. In addition, the company will begin mounting a second SpaceShip III vehicle.

“Our current flight test protocol for the first SpaceShipThree vehicle requires four gliding flights and four powered flights, and we expect the spaceflights to generate revenue,” Colglazier said.

Given Unity’s delays so far, Coglalzier did not want to give specific target dates for the second space flight attempt, only saying Virgin Galactic expects it to ‘take place this summer’. The second Unity spaceflight will carry four passengers with the pilots – the most people Virgin Galactic would have flown at the same time.

Then Virgin Galactic will take a third space test, with the founder of the Unity company, Sir Richard Branson, who has been in the running for almost two decades.

The company also added a fourth spacecraft test for Unity under a partnership with the Italian Air Force. Colglazier said the flight would carry three passengers and multiple research cargo loads, offered as a “suborbital astronaut training” for the Italians. The flight is expected to “take place in late summer or early fall,” Colglazier said, and will conclude the Unity flight test.

Then Virgin Galactic will begin a period of downtime at the interview that Colglazier expects will last about four months. The company will conduct an “analysis and refurbishment period” with its Eve transport aircraft, Unity spacecraft and SpaceShip III vehicles.

“We have decided to apply improvements and accelerations of long-term maintenance updates to our mothership Eve, which will improve the predictability and frequency of flight rates,” Colglazier said.

Given the standstill, Virgin Galactic now expects ‘Unity to start flying with private astronauts in early 2022’, which will be the start of the company’s commercial space tourism service. The company last expects “SpaceShip III to be able to complete its flight test early next year,” Colglazier said.

Several analysts have adjusted expectations for the future results of Virgin Galactic, which have reduced the outlook due to the delays in the test.

“The big news flowing from the print job was the relocation of the flight schedule,” UBS analyst Myles Walton said in a note to investors.

UBS has a neutral rating on Virgin Galactic, which lowers its price target to $ 40 per share from $ 52 per share. Walton said he sees “a little more technical risk on the schedule than before”, although he was “encouraged by the speed with which to build a base for scale when the green light for commercial options is reached”.

Alembic Global Advisors downgraded Virgin Galactic to neutral from overweight, with its price target shifting to $ 39 per share from $ 27 per share.

‘What drives our downgrade is a combination of the current valuation of the shares (the share has more than doubled in 2020 by 78% YTD) and a new outlook for management that appears to be additional capital expenditure and a longer time to reach regularly is positive. passenger journeys of consumers, who now look like we’re on an early 2022 timeline, ‘Alembic analyst Pete Skibitski wrote in a note.

Credit Suisse analyst Robert Spingarn also adjusted its price target on Virgin Galactic to $ 42 per share from $ 36 per share in light of the stock’s strong performance to start the year.

“The updated plan, which relies on higher numbers and newer versions of the spacecraft, is likely to take longer to expand than we envisioned when we began coverage,” Spingarn said.

Credit Suisse has its forecast for Virgin Galactic to push back a large number of Spaceport America flights in New Mexico after 2025 from 2024 to 2025. Spingarn also noted that Virgin Galactic ‘looks satisfied’ with about 11 quarters of cash on its runway, based on the current quarterly combustion rate.

“We now have a higher capex line that may need additional capital by the end of 2022, depending on the pace of further progress and fire rate,” Spingarn noted.

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