Virgin Galactic (SPCE, Financial) is a high-risk, high-reward opportunity that is aiming to bring commercial space flights to market sooner than many people realize. Planning to launch its commercial service as early as 2023, Virgin Galactic offers customers a much more cost-effective method of taking suborbital flights than other companies. At $450,000 per flight, I believe there's a very real possibility that it could attract more than a handful of customers.
Founded by Richard Branson, this space launch service offers investors what currently appears to be the most attractive long-term growth prospects in this still-nascent industry. With improved spacecraft manufacturing and dramatic improvements in mission yields achieved over recent years, I believe we are poised to see a period of rapid improvements in commercial space flights.
Virgin Galactic to launch commercial services this year
Virgin Galactic has been racing to start commercial spaceflight services for quite a while now. The initial time for the inauguration was estimated to be the fourth quarter of 2022, though it was delayed twice because of structural weaknesses and the need for enhancements in the Virgin Mother Ship Eve (VMS Eve), which will launch the Virgin Space Ship Unity (VSS Unity) into orbit, putting a damper on investors' sentiments.
However, the company's first-ever commercial spaceflight is now scheduled to be propelled into orbit in the second quarter of 2023. The suborbital flights are scheduled to be 90 minutes, and the spacecraft will fly the passengers 50 miles above the planet.
Production of Delta class spaceships to begin in 2023
Virgin Galactic is determined to outpace its peers in the space tourism industry; hence, it plans to build Delta class spaceships which have the potential to ferry six passengers into space every week based on concept designs. The production of its new fleet of Delta class ships is set to start in 2023 in collaboration with Qarbon Aerospace and Bell, a subsidiary of Textron. The spacecraft will be assembled on Virgin Galactic's site in Mesa, Arizona. The commercial payload services of the spaceships should begin sometime in 2025, while the passenger services are estimated to start in 2026 and complete nearly 400 missions in a single year.
The Delta class spaceship is an exciting project that could potentially revolutionize the budding space tourism industry. On top of this, the company has a Mach 3 high-speed aircraft that is also in the early stages of development, which further demonstrates just how much opportunity there is for the company to grow.
The cheapest space plane ticket around
The numerous delays faced by the company have put considerable pressure on it. However, I still believe it has the best growth prospects out of all the companies planning to launch civilians into space because of the huge gap in Virgin Galactic's ticket price compared to its peers' ticket prices. Currently, a single ticket to space by Virgin Galactic has a price tag of $450,000, which requires the customers to put down an advance payment of $150,000, and $25,000 out of the deposit is non-refundable.
Space tourism is not targeted toward the general population yet; it is still catered to wealthy people. Nevertheless, the demand for Virgin Galactic's tickets is higher because the other companies charge double or more for a single ticket. One ticket on Jeff Bezos' Blue Origin can cost a person anywhere from $1 million to $28 million.
The main threat to the market for such flights is that there are some companies planning to offer trips to the stratosphere for much cheaper than the cost of a ticket to space. A trip to the stratosphere aboard Space Perspective's balloon-borne capsule is expected to cost $125,000 for six hours.
On the premium end of the market, Axiom Space plans to offer the highest price tag of $55 million, and the journey is 10 days with the International Space Station as its destination.
Play the long game with Virgin Galactic
While I believe Virgin Galactic is a top contender in the passenger space race, the company's growth hinges on multiple factors. It cannot recognize profits until it pulls off successful commercial space flights and subsequent passenger flights. While an analyst at Cowen has projected $1 billion in revenue by 2028, sales estimations can only be clear once the company starts its commercial operations. If Virgin Galactic manages to pull off its goals, it will be in the run to achieving enormous profitability.
According to a report by Allied Market Research, the space tourism industry could be more than $12 billion in value by 2031, observing a compound annual growth rate of 36.4% from 2021 to 2031. On the other hand, analysts at Citigroup (C, Financial) expect the industry to see revenues of $1 trillion by 2040. If these projections are realized, Virgin Galactic's financial growth could be unrivaled - but for now, they're still just estimates. It will take a long time to reach these goals, and who knows how much the company will bring home in profits once all is said and done.
Takeaway
Virgin Galactic is my favorite stock in the highly speculative space tourism industry. This company is consistently pushing to become the first private company to create commercial suborbital flights in a (relatively) cost-effective manner. Although its journey hasn't been flawless and has experienced many trials and delays along the way, it is making progress. Investors who don't like risk could wait for the company to successfully begin passenger operations, but when that day comes, beware that the stock might have already been bid up to astronomical levels.
