stock continued its wild ride Thursday. Shares are soaring as the company prepares to launch co-founder Sir Richard Branson into space this weekend. The move appears to be another case of the investment adage ‘buy the rumor sell the news.’ If that is what’s going on, investors might want to consider trimming positions ahead of the weekend.
Virgin Galactic (ticker: SPCE) stock rose 17.3% Thursday. The
Dow Jones Industrial Average,
for comparison, are both down about 1%. Stocks are down after Japan declared a new Covid emergency related to Delta variant infections.
For Virgin Galactic, there isn’t much news to pin Thursday’s gains on. The stock has jumped from about $15 to more than $50 since early May, after the company got its test flight program back on schedule. Finishing up test flights will eventually lead to the start of commercial operations.
Recently, test flights have been enough to get the stock moving. Shares jumped 28% the first trading day after the company completed a manned test flight on May 22.
Virgin Galactic stock jumped another 39% on June 25 after the company received its license from the Federal Aviation Administration to carry paying customers. That was a bigger reaction to a bigger catalyst.
Virgin Galactic investors, it appears, are getting addicted to stock catalysts. And Thursday it seems they are bidding up shares, hoping for a repeat of those two rapid gains. The next catalyst for the stock is a test flight slated for July 11 that will include Virgin Galactic co-founder Sir Richard Branson.
The flight was scheduled on July 1. “I truly believe that space belongs to all of us,” said Branson in a July 1 news release. “As part of a remarkable crew of mission specialists, I’m honored to help validate the journey our future astronauts will undertake and ensure we deliver the unique customer experience people expect from Virgin.”
The problem for investors is, when catalysts are known in advance, stocks sell off after the event passes. Virgin Galactic stock did fall about 5% the day after the 28% jump. Still, shares march upward to about $40 before the FAA license was awarded. But after the test flight jump, shares were still below where Wall Street believed they were worth.
On May 24, the first trading day after the May 22 test flight, the average analyst price target was about $30. Shares closed that day at about $27. The average analyst price target is $35, and the stock closed at $52.69 Thursday.
The divergence raises the risk of a post-Branson flight sell-off. The market is always forward looking, meaning the value of a Branson flight will be in shares before the flight actually takes place. Investors might want to think about that as they consider holding all of their shares going into next week.
Year to date, investors are certainly happy with their Galactic investment. Shares are up about 122%.
Write to Al Root at [email protected]