Buying Virgin Galactic shares is a no-brainer after Morgan Stanley downgrade
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Morgan Stanley has his reading glasses on and is stuck reading the fine print when it comes to Virgin Galactic’s (NYSE:SPCE) “downtime” to come. He recently downgraded SPCE stock to “underweight” and maintained a price target of $ 25.
But, when it comes to investing in breakthrough companies like Virgin Galactic, the usual tactics don’t always work as well as more traditional businesses.
The reason for Morgan Stanley’s decommissioning is the fact that Virgin Galactic’s only mothership will be “grounded” for the next eight months.
The reason for grounding, however, is not a bad reason at all. Virgin Galactic plans to implement upgrades to the mothership after the successful launch.
So, despite a break in revenue-generating commercial flights for now, Virgin Galactic is really doing everything in its power to speed things up internally as efficiently as possible.
And the $ 500 million in shares that Virgin deposited to sell after its first flight should help fuel this period of infrastructure upgrades.
The result on SPCE actions
In the grand scheme of things, is eight months really such a long waiting period? We don’t think so – big things take longer than most investors would expect.
Especially because once it’s time for Virgin Galactic to spread its wings again… It won’t stop.
After Virgin’s brief hiatus, we expect to see at least one commercial space flight per quarter through the end of 2022, if not more.
It boils down to this: Virgin is essentially sitting at zero today. But soon enough there will be a huge acceleration of the catalysts.
Buying when there are catalysts and selling when there are downtime is a trading strategy. But long-term investors don’t care about this stuff. What they are looking for, however, is for Virgin Galactic to create a highly demanded, highly profitable space tourism business that will someday be worth tens of billions of dollars.
Downtime in 2021 or 2022 has no impact on this long-term picture.
That’s why we can’t recommend buying this drop under $ 30 enough. Virgin Galactic’s behind-the-scenes upgrades over the next eight months will take Virgin and SPCE shares to new heights.
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At the time of publication, Luke Lango had (directly or indirectly) no position in any of the stocks mentioned in this article.
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The article Buying Virgin Galactic shares is a given after the Morgan Stanley downgrade first appeared on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.