Is Virgin Galactic (SPCE) Headed For Bankruptcy?

Space may be the final frontier, but not the way Richard Branson might have imagined.

Last week, his company, Virgin Galactic (SPCE), did a 1-for-20 reverse stock split to keep share prices high enough to stay listed on the Nasdaq.

This caught the attention of financial pros who began searching for the company at a faster clip than any time in the last 90 days.

The company recently finished its final spaceflight for the year at Spaceport America, New Mexico, as the company looks towards its “Delta” class ships, which are set for commercial service in 2026.

Yet, the company is burning cash with a shrinking balance sheet.

So, what everyone wants to know is can this company survive and thrive?

Virgin Galactic’s Business

A trip into space will set you back around $600,000 with Virgin Galactic.

The commercial space venture aims to make suborbital space travel widely available, provided you have the resources.

Source: Virgin Galactic Q1, 2024 Investor Presentation

The VMS Unity is the current spaceship, set to retire as the Delta class comes online.

Both are launched from the VMS Eve mothership.

Delta ships are expected to run at 400 flights per year. As of Q1 this year, the company was working on tool delivery and parts fabrication for the Delta class.

With a cash burn rate of $400-$500 million annually and a bit more than $800 million in cash and securities, Virgin Galactic only has a couple of years before they run out.

However, with meme stocks back in fashion, there is an opportunity for them to tender more shares to raise capital.

Financials

Source: Stock Analysis

Revenues have grown steadily as the company books and launches spaceflight.

Yet, its cost of revenue exceeds its sales by 9x.

Total cash burn is expected to near $500 million this year as production of the Delta class ships gets underway.

Valuation

Source: Seeking Alpha

Virgin Galactic’s business differs significantly from most other aerospace and defense companies.

Every other company on this list generates positive cash from operations and earnings, whether GAAP or non-GAAP.

The only measures to compare them all are price-to-sales and price-to-book, both of which say Virgin Galactic is incredibly expensive.

Growth

Source: Seeking Alpha

Don’t let the revenue growth fool you here. Virgin Galactic generates a bit more than $8 million annually.

Innovative Solutions & Support (ISSC) has the second-lowest sales at $44 million, followed by AeroVironment (AVAV) at $706 million. The rest generate more than $1 billion in annual sales.

And except for Triumph Group (TGI), all show profit growth.

Profitability

Source: Seeking Alpha

Interestingly, AeroVironment is the only company besides Virgin Galactic with a negative net income margin (or none at all).

However, both AeroVironment and Innovative Solutions & Support have negative free cash flows.

Clearly, things aren’t easy for the smaller companies in the space (pun intended).

Our Opinion 0/10

While we love space travel and Richard Branson, we can’t advocate for Virgin Galactic.

The company is underfunded and unlikely to make it to its Delta ship launch without another cash infusion.

We see any run in the stock being used as a possible share tender to raise funds and a selloff catalyst.

Virgin Galactic may survive. But it’s unlikely to be a good investment.

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