The share price of suborbital flight technology developer Virgin Galactic Holdings, Inc. (SPCE) has been declining this month as over the month the stock lost about 13% of its value. The VSS Unity suborbital aircraft test flights clearly showed the prospects and dangers for Virgin Galactic.
The company completed a botched test flight this month. The carrier plane raised and lowered the VSS Unity suborbital ship to a preset altitude, but did not fire the VSS Unity rocket motor. As a consequence, the lower space limit could not be reached, and VSS Unity safely landed on the runway in planning mode (without traction).
An unsuccessful test flight resulted in a decline in share prices, but on the contrary, it may be beneficial from the publicity point of view. Future suborbital tourists have obtained visual assurance that VSS Unity is able to safely return to earth in the case of an engine failure. The key risks for Virgin Galactic are difficulties in maintaining safety while traveling at high speeds, and minimal profitability.
Furthermore, Virgin Galactic already has a future rival, and as soon as possible, the company wants to launch commercial flights. A series of three test flights is currently planned by Virgin Galactic, with commercial flights expected for late 2021.
Therefore, the investment in Virgin Galactic also has an elevated degree of risk and, with the lack of commercial flights, the shares are pricey. The prospect of the use of suborbital aircraft for training NASA crews is an additional positive aspect.
The company sent a Christmas Eve note to its fans assuring them that it is hard at work to figure out why its rocket did not fire in the last flight test and that it will sort out the issue and that it is already trying to have the second space plane designed in time to launch commercial operations. But that worked adversely as stock price fell by 7% on very next day on Monday after the Christmas holiday.
On Tuesday, the decline of the stock price continued with Virgin Galactic Holdings, Inc. (SPCE) down -0.79% to $23.75. But Year-to-date, the stock has gained more than 100%.