Morgan Stanley thinks Virgin Galactic shares will triple in price


Morgan Stanley thinks Virgin Galactic shares will triple in price

Morgan Stanley began coverage of Virgin Galactic stock on Monday with a revaluation, saying the space tourism company’s stock will skyrocket as it aligns with long-term plans to develop global passenger travel at hypersonic speeds..

«A viable space tourism business is what you pay for today… but the chance to ruin multi-million dollar airlines [common addressable market] is what can really drive growth», – wrote Morgan Stanley analyst Adam Jonas in a memo to investors.

Virgin Galactic shares are up more than 13% from their previous close of $ 7.26. Since its debut on the New York Stock Exchange on October 28, stocks have been falling steadily, down about 40% from a high of $ 12.93..

Morgan Stanley thinks Virgin Galactic shares will triple in price

Morgan Stanley’s target of $ 22 a share represents an increase of 203% over Virgin Galactic’s current level. The company mapped out a three-phase plan for investors during its roadshow earlier this year. While Morgan Stanley valued space travel company Virgin Galactic at $ 10 in Phase 1 and Phase 2 of its plan, the company expects to receive $ 12 per share in Phase 3: Hypersonic Point-to-Point (P2P).

«Stocks are characterized by biotech-type risks / rewards, while modern space tourism businesses serve as a funding strategy and catalyst for innovation to introduce technologies that enable hypersonic P2P air travel.», – said Jonas.

Morgan Stanley thinks Virgin Galactic shares will triple in price

Jonas, known on Wall Street for his fondness for Tesla, also recently drew attention to the fast-growing space industry..

Morgan Stanley projects $ 800 billion in annual hypersonic travel sales by 2040, roughly two decades from now. Virgin Galactic is in the early stages of exploring how technologies developed for space tourism can be applied to hypersonic travel. Recently, the venture arm of Boeing HorizonX invested $ 20 million in Sir Richard Branson’s company specifically to study hypersonic technology..

«While some investors describe the possibility of high-speed hypersonic P2P air travel as« icing on the cake, we see Hypersonic as a cake and icing, and space tourism is like an oven», – said Jonas.

The investment bank became the third company on Wall Street to start covering Virgin Galactic shares. Credit Suisse and Vertical Research Partners also have their own buy ratings.

Virgin Galactic is expected to start flying with its first space travel customers in the next six to nine months. Morgan Stanley estimates that Virgin Galactic will be able to increase its flight offerings by 2030 to serve more than 3,000 passengers. According to Jonas, «an addressable space tourism market, albeit a niche one, is supported by a range of industries (e.g. yacht charter and luxury cars)».

«The goal of space tourism for next year is to be safe, to remain funded, says Jonas. – We believe that the key catalyst over the next 12 months will be to send even one client into space and return safely».

Jonas believes that if the company does this, Virgin Galactic will remain the leader among companies exploring the hypersonic travel market. Overall, Morgan Stanley has Virgin Galactic valuations of $ 60 off «bulls» and an estimate of $ 1 – from «bears».

«There are many risks and uncertainties in this story, including the likelihood of fatal accidents, regulatory hurdles, limited market acceptance, competition, insufficient economics and liquidity constraints, added Jonas. – Considering all this, we believe that the risks are offset by the potential scale of the reward».

Morgan Stanley thinks Virgin Galactic shares will triple in price

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