Virgin Galactic (NYSE: SPCE) stock price is languishing at a record low as concerns about the company continue. The shares were trading at $1.67 on Tuesday, 98% below its all-time high, giving it a market cap of over $660 million. At its peak, the company was valued at over $13 billion.
Risks in the business remainVirgin Galactic is one of the leading players in the fast-growing space tourism industry. The company has spent billions of dollars doing research and building its products in the past 19 years. It has now started limited commercial flights as it prepares to ramp up in 2024.
Launch update: The #Galactic04 spaceflight will now take place on the second day of our flight window – Friday, October 6 to give our team an additional day to complete vehicle prep and checks. We look forward to taking to the skies in a few days!
— Virgin Galactic (@virgingalactic) October 1, 2023Virgin Galactic stock price has crashed as investors assess the risks in the business and the rising cash burn. The most recent results showed that the company had a net loss of more than $134 million. It has lost over $698 million in the past five quarters.
Many unprofitable companies did well in the past decade as the Federal Reserve left interest rates to a record low. Now, however, rates have surged to the highest level in more than two decades, putting these companies at an elevated risk.
The other risk for Virgin Galactic is that its industry is getting quite competitive. Its primary competitors are companies like SpaceX and Blue Origin, which are backed by the two richest people in the world.
However, Virgin Galactic has a few pros. For one, it has a strong balance sheet, with over $940 million in cash against $477 million in debt. This means that these funds can last until 2025 if the cash burn remains at the current level.
Virgin Galactic could also become a highly profitable company if all goes well. The firm estimates that it will make $800,000 per flight in its Unity ship when it ramps up its flights. And there is still demand for the travel, with the company having 800 customers in its reservations.
SPCE stock price forecast
The daily chart shows that the Virgin Galactic stock price has been in a strong bearish trend in the past few months. This decline saw the shares flip the important support level at $3 into a resistance. It has dropped below all moving averages while the Relative Strength Index (RSI) has moved to the oversold level.
Therefore, from a technical perspective, I suspect that the shares will continue falling as sellers target the psychological level at $1.50. In the long term, however, I believe that the company has a favourable risk/reward ratio. A rebound could see it rebound and retest the resistance at $2.99, ~83% above the current price.
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