Making Money with Virgin Galactic Isn’t Rocket Science

SpaceX grabs headlines, but don't ignore the opportunity in SPCE stock

Social media is buzzing about Elon Musk’s pet manned-space-flight project, SpaceX. It’s gotten to the point where Richard Branson’s similar project, Virgin Galactic (NYSE:SPCE), is losing the spotlight. Does this mean that investors should ignore SPCE stock?

That could be a costly mistake, at least in terms of leaving potential profits on the table. For one thing, the initial public offering for SpaceX hasn’t even happened yet, assuming it happens at all (though it seems pretty likely). So, if you’re looking for a manned-space-flight investment right now, SPCE stock is the obvious choice.

Still, investors must understand that SpaceX is a factor. Traders should weigh the merits and drawbacks of Virgin Galactic on its own but also keep tabs on SpaceX. Then, position yourself accordingly, which could mean not positioning yourself in SPCE stock at all.

A Closer Look at SPCE Stock

In the first couple of months of his year, SPCE stock definitely went on what you might call a “hype flight.” The problem with hype flights is that, like Virgin Galactic’s planned space flights, they’re generally round-trip.

SPCE shares began the year under $12 but, with the dream of manned space flight capturing the nation’s imagination, a rocket mission to the $32 level was achieved in February. Unfortunately for the buy-and-holders, though, this hype flight had a crash landing as the spread of the novel coronavirus put a damper on people’s space-flight fantasies.

By the March 19 2020, SPCE stock was trading at the $10.50 level, representing a two-thirds share-price decline from the peak. The stock has recovered some of those steep losses, however. Now it’s a question of whether investors should consider this a bargain or a piece of space debris.

Elon’s Baby Gets the Attention

Elon Musk is, among other things, a master of generating attention. Some people might say that the success of Tesla (NASDAQ:TSLA) stock has been built on Musk’s cult of personality and his prowess as a consummate hype man.

Richard Branson has exhibited some flair for fanfare and he’s been eccentric at times, but he’s no Elon Musk. So, it shouldn’t be too surprising that Musk’s baby, SpaceX, seems to be generating more buzz at the moment.

No doubt, Musk’s ego was brimming when Barron’s published the praise-packed piece “Tesla CEO Elon Musk Makes History With SpaceX.” In it was a detailed description of how SpaceX facilitated “a day for the history books” when it supplied the equipment for a rocket that NASA used to launch astronauts into space.

Ego stroking aside, this was undeniably a big day for SpaceX. Sometimes companies benefit when their competitors make big strides. You might have heard this phenomenon called the “sympathy effect.” But there was no sympathy here as Musk’s relentless drive to crush all competition threatened to leave Virgin Galactic earthbound.

Branson’s Empire Strikes Back

On the other hand, if you think Branson’s going to take this lying down, you’ve got another thing coming. Overlapping company Virgin Orbit recently attempted to launch a rocket with the objective of sending small-sized payloads into orbit.

While the mission was aborted due to an unspecified issue, progress was nonetheless made in the test mission:

“In this first launch demo, we successfully completed all of our pre-launch procedures, captive carry flight out to the drop site, clean telemetry lock from multiple dishes, a smooth pass through the racetrack, terminal count, and a clean release from the aircraft.”

SPCE stockholders can’t expect every mission to be a spectacular success in every way. The objective should be to see progress, not perfection.

And in this instance, even if the media didn’t necessarily pick up on it, progress was definitely made. As the company tweeted from its Virgin Orbit account, “our goals today were to work through the process of conducting a launch, learn as much as we could, and achieve ignition… we accomplished those key objectives today.”