Bank of America Corporation (NYSE:BAC) called Virgin Galactic Holdings, Inc. (NYSE:SPCE) growth potential "unparalleled" even though it isn't yet operational. Analysts have named Sir Richard Branson's company as the "innovator" of space technology with a "truly unique offering" for users to access space for entertainment and research purposes. Its shares have advanced 72% this year.
Virgin Galactic is close to its inaugural flight by having completed 27 out of 29 milestones. Sir Richard Branson should fly to the edge of space during the first quarter of 2021, with commercial flights commencing shortly afterward. Its next milestone is the test crewed spaceflight due on October 22nd. Virgin's efforts will likely result in launching its service first. By becoming a first-mover, it can become synonymous with this new industry that is yet to be tapped into.
The Bank of America named five reasons Virgin Galactic could move even higher as it begins to serve customers in 2021.
A leading position and lack of competition
The British billionaire has two significant rivals – Tesla inc (NASDAQ:TSLA) Elon Musk and Amazon.com, Inc. (NASDAQ:AMZN) Jeff Bezos. Musk is aiming for Mars with SpaceX. Despite Amazon's skyrocketing success, Blue Origin is significantly behind Branson's efforts as it has not ever flown passengers.
Extraordinary growth potential
The long-term opportunities are border-revolutionary considering Virgin Galactic is more than space tourism. Its hypersonic point-to-point travel could entirely disrupt the air travel industry considering a trip from Los Angeles to Tokyo would take only 2 as opposed to 11 hours.
Chief Space Officer George Whitesides spent more than a fifth of a century at NASA. Its CEO Michael Colglazier, who spent more than 30 years at The Walt Disney Company (NYSE:DIS), most recently managing its international parks division that was slammed by the pandemic.
Full vertical integration
There is no company in the world that designs and builds its own aircraft end-to-end and then operates that vehicle commercially. Virgin Galactic is unique because it has nearly full vertical integration by building, assembling and operating aircraft. The Bank of America found that the steps the company has taken over the past decade to vertically integrate somewhat mitigate execution risk.
The company's target audience is adults with a total net worth of over $10 million. This is a potential customer base of 2 million across the globe. But Virgin has mentioned that many customers have a net worth materially lower than $10 million, which redefines the target audience as space enthusiasts.
Takeaway- certain risks are still there
Virgin Galactic has no financial or operating history. Moreover, its valuation could be a challenge since there are no directly comparable companies. In 2018, Virgin Galactic lost $138 million. Last year it burned through $211 million. During the first half of 2020, it was already $123 million in the red. Since it was founded more than 15 years ago, capital investment has gone north of a billion dollars and operations resulted in two fatal accidents, including a total loss in flight. But Branson remains as a brand to bet on.
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