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Is Virgin Galactic Stock a Solid Long Term Investment?

Virgin Galactic

Based on its name, people should have no problem guessing that Virgin Galactic was founded by Richard Branson, who is best-known for having founded the Virgin Group in the 1970s. However, it is important to mention that said company is a spaceflight company based out of the United States. There, its headquarters is situated in the state of California while its operations are situated in the state of New Mexico. In recent times, people might have seen Virgin Galactic's name come up in the news. This is because the founder Branson plus three of the employees rode on one of its flights into space on July 11 of 2021, thus bringing it that much closer to its stated mission. Something that might prove interesting to stock investors.

What Does Virgin Galactic Do?

Perhaps unsurprisingly, Virgin Galactic isn't a company that is famous for being profitable. After all, space travel is expensive, meaning that starting up a spaceflight company is expensive. The exact numbers are unknown. However, there is speculation that Branson has spent more than $1 billion in this regard. Something that is connected to the fact that Virgin Galactic loses tens of millions of dollars in a single quarter. Still, the spaceflight company does have a plan for becoming profitable, which is closer than ever because of the aforementioned flight. Virgin Galactic's plan for earning revenues isn't particularly outlandish. For instance, it isn't making promises about mining asteroids, which is a concept that gets tossed around a lot in certain space enthusiast circles. Instead, Virgin Galactic has something much more practical in mind even though it involves a not so practical service. Simply put, it intends for its main source of revenues to come from sales of passenger tickets on its flights. Previously, a single passenger ticket went for $250,000. Now, a single passenger ticket goes for $450,000. Besides this, Virgin Galactic also sells tickets for microgravity research as well as astronaut training, which are more expensive at $600,000 a seat. Currently, these flights are expected to start happening in 2022.

Of course, starting to make money isn't the same as becoming profitable all of a sudden. After all, businesses need to spend money to make money, so it can take them quite some time before their revenues start exceeding their expenses. The idea is that revenues will rise as the business expands its operations while expenses will fall as the business becomes more and more efficient at running its operations. Unfortunately, it is difficult to predict when this will happen as well as whether this will happen for Virgin Galactic at all. The space industry isn't exactly what anyone would call a well-established industry, meaning that there just aren't a lot of sources of good information that can be used to inform such guesses. Thanks to this, the prospects of Virgin Galactic are murky because it is venturing out into the unknown in a very real sense.

Is Virgin Galactic Stock a Good Choice for a Long-Term Investment?

It is difficult to say whether Virgin Galactic will make a good long-term investment or not. Instead, it might be more useful for people to figure out what makes a stock a good choice for a long-term investment before trying to see whether Virgin Galactic fits that or not. For starters, people should have a good idea of how a company makes money before they buy its stock for the long run. After all, if they don't even know what a company does, they are going to have a hard time evaluating anything about its operations. Fortunately, Virgin Galactic is relatively straightforward in this regard. It intends to make money by selling tickets on its flights. Perhaps Virgin Galactic will expand into related services in the times to come. However, that will be its focus for the time being. Still, it is a good idea for people to read more about its operations, particularly since Virgin Galactic's high-profile nature means that said information is readily available. Moving on, people tend to want a stock that will offer them good returns on their investment. This is a serious issue when it comes to Virgin Galactic stock. They can look at its performance in the past. However, that performance says very little about how Virgin Galactic stock will start performing when it starts making money, particularly since this is a very new market. On top of that, there is no real guarantee that the Virgin Galactic will start making a profit anytime soon, meaning that it could very well seek out further sources of funding in the near future. Something that could dilute an investor's stake in the company through their shares.

On the plus side, if there is one benefit to Virgin Galactic's entry into a very new market with very high barriers to entry, this means that it has relatively few competitors and will continue to have relatively few competitors in the future. Space tourism isn't entirely a new thing. During the 2000s, seven individuals went to space on Russian spacecraft, which was possible because they were said to have paid $20 to $25 million for each trip. Nowadays, there are a number of spaceflight companies interested in space tourism of one kind or another. For example, both Boeing and SpaceX are eyeing orbital space tourism. Meanwhile, Elon Musk has announced an interest in tourism beyond Earth's orbit. However, Virgin Galactic seems to be unchallenged in its particular niche of sub-orbital space tourism, though it remains to be seen whether that will remain the case in the times to come. Of course, there are other factors to consider as well. To name an example, it is difficult to tell whether Virgin Galactic stock is valued at a fair price or not at this point in time. However, things are bound to become clearer once more information becomes available when its revenue-earning operations start up. As for stability, well, it seems reasonable to say that Virgin Galactic won't be going away anytime soon. The space industry isn't something that people invest in for 100 percent rational reasons. Space is interesting, which in turn, means that there are a surprising number of people who are willing to throw money at it in pursuit of space flight as well as other related projects. On top of that, Virgin Galactic is backed by Branson, who is a multi-billionaire after all. In the end, people are going to need to make up their own minds about whether Virgin Galactic will grow enough in the future to make it a good choice for a long-term investment. The more research that they do, the more capable they will become of making the most suitable choice in this regard for their particular preferences.

Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

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