UBS analyst Myles Walton downgraded Virgin Galactic Holdings Inc., citing valuation concerns after the stock more than quadrupled since he went optimistic around six weeks ago. After raising the stock to buy on May 20, Walton lowered his recommendation to neutral. He did, however, lift his price objective from $36 to $45; nonetheless, that aim is now 7.9% below current levels.
The stock SPCE, +4.90 percent jumped 8.7% in choppy morning trading after moving in an intraday range of down 1.6 percent to up 9.4 percent. Walton said his May upgrade came after a selloff fueled by concerns about test-flight delays and competition pressures, both of which he claims have passed. Walton expressed his optimism, particularly in light of the Federal Aviation Administration’s latest operator license upgrade. Not to be missed: After the FAA cleared passenger flights into space, Virgin Galactic’s stock rocketed to a new high. The stock had risen 126.9% from the day Walton upgraded the stock on May 20 to Friday. The S&P 500 index SPX, -0.54 percent gained 4.6 percent during the same period. “Though we consider this catalyst chain as intriguing, we do see a lot pricing in at the stock’s present levels,” Walton said in a letter to clients. A series of upcoming test flights, including one on July 11 with founder Richard Branson on board and the start of ticket sales, will offer support for the stock in the following months, according to Walton. Following that, a lack of anticipated catalysts could dampen sentiment. “After the summer of flights, there will likely be less news flow in the fall when the flying program is shut down for maintenance into 1Q22,” Walton said. Furthermore, the expiration of share lockups for the original investor base (30 percent of the float) could add to the pressure. ” Last week, the stock fell 19.6%, snapping a six-week winning streak in which it had risen 245.6 percent. With commercial operations slated to begin in earnest in early 2022, Walton said the firm will need to reassure investors in their 400-flight-per-year goal by releasing both a capital investment plan and a rate-ramp profile. His current price target for the stock is based on a ticket to space costing $300,000 to $350,000./n
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