Virgin Galactic Holdings, Inc. SPCE is slated to report fourth-quarter 2021 results on Feb 22 after the closing bell.
In the last reported quarter, the company delivered a negative earnings surprise of 28.00%. Virgin Galactic has a trailing four-quarter negative earnings surprise of 33.86%, on average.
Factors to Note
Virgin Galactic’s strategic moves like the vehicle enhancement program and the expansion of the fleet with Delta Class spaceships and the modification of next-generation motherships, buoyed by solid space travel demand, must have had favorably contributed to SPCE’s fourth-quarter revenues.
Additionally, the sponsorship activity from the Unity 22 space flight, along with revenues earned under government contracts, is expected to have continued to favorably impact its revenues in the fourth quarter.
However, the cost involved in the enhancement program and the expansion of the fleet must have had increased the overall expenditure of Virgin Galactic in the soon-to-be-reported quarter. This, in turn, might have hurt its earnings in the soon-to-be-reported quarter.
Also, marketing costs related to the Unity 22 spaceflight and the reopening of ticket sales, along with an increase in employee costs and non-cash stock-based compensation expenses, are expected to have had dampened its bottom line. However, a decrease in contract labor and material costs associated with the development of the spaceflight system may have partially outweighed the negative impact on its earnings in the fourth quarter.
Analyst view
Morgan Stanley analyst Kristine Liwag called the opening of Virgin Galactic's ticket window "encouraging," but she contends that demand is not the company's limiting factor. Instead, she argues, the core challenge for Virgin Galactic is execution on its plans to scale operations to 400 flights per year per spaceport. With Eve grounded until about June 2022 "at the earliest" she does not see any meaningful positive catalysts for the stock until then. Liwag keeps an Underweight rating and $16 price target on Virgin Galactic shares.
Bernstein analyst Douglas Harned lowered the firm's price target on Virgin Galactic to $10 from $22 and keeps a Market Perform rating on the shares ahead of Q4 earnings. The analyst notes that he has argued previously that Virgin Galactic is in a period with few clear upside catalysts, as it works simultaneously to enhance its existing fleet and ramp production of the next generation Delta Class spaceships. He views the Delta class as critical to achieving breakeven cash flow, which he does not expect before 2027. The company previously indicated that more financing would be needed to fund the business through this development program, after a $500M equity raise in Q3 2021. But, the $425M convertible bond offering announced in January indicates that near-term cash requirements are greater than expected, Harned adds.
BofA analyst Ronald Epstein lowered the firm's price target on Virgin Galactic to $10 from $20 and keeps an Underperform rating on the shares as he updated price targets for select Space-related stocks he covers to account for changing market dynamics, including anticipated Fed rate hikes that drive his discount rate up. He sees short-term downside pressure on shares from a lack of catalysts, upcoming equity raises and expiration of a lock-up period, said Epstein, who adds that he is pushing out his expectations for the start of high-speed point-to-point operations to 2043 from 2040.
Virgin Galactic's revenue in the fourth quarter of 2021 is expected to be $938.33K, its adjusted net loss is expected to be $93.1M, and its adjusted EPS is expected to be $-0.359, according to Bloomberg's unanimous expectation.