Gaining 5% and then losing 4.4% may not sound so bad. It sounds like it should still yield a net gain. But in fact, adding 5% to a smaller number, then subtracting 4.4% from a larger number, means that ultimately … Virgin Galactic stock ended up lower today ($34.89 a share) than it was before spiking on the Blue Origin news ($35.10)!
There are two things you should know, though. First: There was no good reason for Virgin Galactic stock declining today — no analyst downgrades, no negative earnings news, no news at all, in fact.
And second: There’s actually better reason for Virgin Galactic stock to be going up instead of down.
Consider that Blue Origin’s magic ticket ended up selling for $28 million on Saturday. Granted, it’s highly unlikely that Blue will be able to sell very many tickets at that price. More likely, regular commercial space tourism flight tickets will be priced considerably lower — but the $28 million price tag on that first ticket is highly suggestive that demand for space tourism, and willingness to pay high prices for the service, may be greater than we thought.
And here’s even another reason to be optimistic: In a note to potential customers that was reviewed by The Washington Post last week, Virgin Galactic stated that it expects to wrap up its test flight program on the VSS Unity spaceplane “by late summer or early fall.”
In a note to potential customers, Virgin Galactic indicates it is sticking to the original test flight schedule: First a flight with 2 pilots and a cabin of 4 mission specialists and then Richard Branson’s flight. pic.twitter.com/gEqhw0z0N8
— Christian Davenport (@wapodavenport) June 10, 2021
Assuming this is the case, it will leave perhaps as many as four months before the end of 2021 — time in which Virgin could conceivably begin commercial space tourism operations this year, rather than waiting to fly commercially until 2022, as experts have suggested was more likely.
The sooner Virgin Galactic starts flying commercially, of course, the sooner it can begin selling tickets and collecting revenue. That’s good news for Virgin Galactic — and good reason for the stock to be going up today, not down.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.