Cowen cuts Virgin Galactic target to $4.50, keeps buy rating

On Monday, Cowen analysts adjusted their outlook on Virgin Galactic (NYSE:SPCE) shares, reducing the price target to $4.50 from the previous $9.00, while still holding a positive stance with a Buy rating. The stock, currently trading at $3.72 and near its 52-week low of $3.60, appears undervalued according to InvestingPro calculations. The firm’s analyst noted the completion of the design phase and the transition into a year focused on building and testing. Virgin Galactic is aiming to achieve sustained commercial service in the second half of 2026.

The fourth quarter free cash flow (FCF) for Virgin Galactic was reported at a loss of $117 million, which was favorably within the company’s guidance range of a $115-125 million loss and slightly better than the Street’s expectation of a $121 million loss. For the first quarter, the company has projected a similar FCF loss range of $115-125 million. However, Virgin Galactic has plans to reduce its spending to below $100 million by the end of 2025.

Virgin Galactic holds a liquidity position of $657 million and has access to an additional $270 million through an at-the-market (ATM) offering. With a current ratio of 4.19, the company maintains strong short-term liquidity despite its operational challenges. However, the company faces the maturity of $425 million in convertible notes due in 2027. The revised price target of $4.50, which is underpinned by a discounted cash flow (DCF) analysis, reflects optimism for Virgin Galactic’s future operations but also takes into account the challenges it faces, including the current absence of revenue and the anticipated wait for more substantial engineering milestones until the latter half of 2026. For deeper insights into Virgin Galactic’s financial health and future prospects, investors can access comprehensive analysis through InvestingPro’s detailed research reports.

In other recent news, Virgin Galactic Holdings Inc. reported its Q4 2024 earnings, highlighting a strategic focus on operational efficiency and product innovation. The company revealed a revenue of $400,000 for the quarter, primarily from future astronaut membership fees, contributing to a full-year revenue of $7 million. Operating expenses for the year decreased by 29% to $384 million, reflecting a significant cost management effort. Virgin Galactic is progressing with the development of its Delta class spaceships, which are expected to significantly boost revenue by 2026, with projections reaching $450 million. The company plans to start assembling these new spacecraft in March 2025, aiming for over 500 flights with capabilities for twice-weekly missions. Analysts noted that the company is moving beyond its R&D phase and investing in manufacturing assets to enhance production capabilities. Virgin Galactic’s CEO, Michael Colglazier, emphasized the company’s strategic focus on manufacturing and fleet expansion as it prepares for future growth. The company also faces challenges, including high development costs and potential delays in launching the Delta class spaceships.

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