- Virgin Galactic (NASDAQ: SPCE) stock is the darling of Wall Street speculation.
- Chairman Chamath Palihapitiya believes his company It is not a bubble, comparing it to Tesla and citing pent-up demand for space travel.
- Unfortunately, SPCE stock is still light-years away from being like Tesla, or even Beyond Meat.
Virgin Galactic Chairman Chamath Palihapitiya is upset that analysts are calling SPCE stock a bubble . He claims the space tourism company offers investors a “unique” Tesla-style narrative, along with $ 2.4 billion in potential revenue.
Credit where credit is due: Palihapitiya’s argument is out of this world. But not in a good way.
Virgin Galactic Chairman Makes His Case For SPCE Stock
Space tourism sounds very intriguing. Hop in a rocket and go on an awe-inspiring voyage around the Earth. The Instagram opportunities alone are unfathomably attractive.
That’s why it’s not entirely surprising that
Virgin Galactic stock has been on an incredible run in , with SPCE shares up more than % even after the recent stock market sell-off . Palihapitiya, clearly fed up with all the accusations that SPCE stock is a bubble,
went on cable television to make his case . Unfortunately, everything he said confirmed that Virgin Galactic’s rally is exactly that.
He began with this gem:
There’s a setup [in the market] where there’s no real growth, there’s no unique stories and there’s nothing that can give you long-term outlook
Over the last few years, this has meant
the growth story is often more significant than the economic fundamentals of a business
.
Beyond Meat and Tesla are examples of companies like this. (We’ll get to why it isn’t fair to compare them to Virgin Galactic stock later.)
went on cable television to make his case . Unfortunately, everything he said confirmed that Virgin Galactic’s rally is exactly that.
He began with this gem:
There’s a setup [in the market] where there’s no real growth, there’s no unique stories and there’s nothing that can give you long-term outlook
Over the last few years, this has meant
the growth story is often more significant than the economic fundamentals of a business
.
Beyond Meat and Tesla are examples of companies like this. (We’ll get to why it isn’t fair to compare them to Virgin Galactic stock later.)
Next, Palihapitiya suggested that his space tourism business has a sizeable amount of demand, some $ 2.4 billion. This is based on the statistic that roughly 8, people have expressed interest in taking a flight.
Unfortunately, this “pent-up demand” is rather, well, pent-up.
Currently, just one spaceship is nearing operation,
Not six ty .
Not six teen.
Six .
You don’t have to be a market wizard to figure out that 8, – divided-by-6 isn’t exactly cash waiting to be delivered.
We won’t go into how many of the 8, 12 who signed up are just dreamers, or how realistic $ , is as a price-tag.
And according to their CEO, ti cket costs could actually be as high as $ 1 million.
Ignoring the dreamers, how many genuine prospective passengers would casually stomach that $ , 06 price hike?
It’s not like there isn’t plenty of well-funded competition out there.
If Tesla Stock Is a Bubble, Virgin Galactic Is a Balloon
Finally, the Virgin Galactic chairman made a questionable comparison between SPCE and Tesla.
Tesla may be controversial, but it’s a company that actually has a product , sells a lot of them, and is a class-leader in terms of innovation.
Sky-high cash burn links SPCE and TSLA, but that’s where the fundamental similarities end.
Tesla stock has been accused of being a bubble , and that’s an absolutely valid thesis – at least if you prioritize conventional accounting and valuation metrics.
But Virgin Galactic is up more than double TSLA this year:
Virgin Galactic’s SPCE stock (green) has doubled the gains from Tesla (blue) in 235939. | Source: Yahoo Finance
If you think Tesla is a bubble, then that makes Virgin Galactic a balloon.
To Infinity & BYND
Sir Richard Branson’s venture into the billionaire playground of space travel looks more like Beyond Meat (NASDAQ: BYND) than Tesla.
It’s the only publicly traded game in town for space travel, so it gets a larger slice of the speculative interest in that concept. BYND enjoys the same status As a company solely devoted to alternative-meat products.
Yet it’s probably unfair to compare Beyond. Meat to Virgin as well, because BYND has shown glimmers of profitability lately .
Virgin Galactic is the very definition of a bubble, and its backers should embrace that fact – not dispute it with questionable forecasts. Such optimistic guidance can often be precisely why gullible investors get hurt.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.
This article was edited by Josiah Wilmoth
(Read More)
GIPHY App Key not set. Please check settings