About 300,000 people want to be astronauts and are willing to pay for a few minutes of floating in space, according to Virgin Galactic Holdings.
The Tustin-based space tourism company is setting out to capture about 1,650 passengers annually.
“With an estimated total addressable market or TAM of 300,000 customers growing at 8% per year, we would still only be fulfilling less than 1% of global demand,” Chief Financial Officer Doug Ahrens told analysts on an Aug. 7 conference call to discuss second quarter results.
Virgin Galactic is trying to drum up interest in its shares, which have fallen about 64% since June 12 when it announced a 1-for-20 reverse stock split (NYSE: SPCE).
It ended flights on its four-passenger Unity spaceship to pour resources into two new six-passenger Delta spaceships, which the company reaffirmed will be ready for takeoff in 2026.
Its second-quarter revenue more than doubled to $4.2 million, as it took in more money from future flyers. It reduced its adjusted EBITDA loss to $79 million, down from a $116 million loss in the same quarter a year ago. It also said its cash position was “strong” with $821 million on hand as of June 30. It expects to burn $115 million to $125 million in the current quarter.
The second quarter caused some analysts to reduce their price targets.
Wells Fargo analysts wrote that they don’t see a reason to become positive, saying Virgin Galactic’s backlog is down to 700 passengers from 800 a year ago. They lowered the price target to $1 from $15 with an underweight rating.
Another analyst, Susquehanna, lowered the price target from $8 to $6, saying the company’s “cadence has now paused” as resources are committed to the Delta class.
A year ago, Virgin Galactic registered a market cap of $1.3 billion. The valuation is now down to around $187.3 million with the shares at $6.57 each at press time.
$1B Annually?
The recent projection is based on a passenger paying $600,000 each, Ahrens told analysts.
The projections include 125 spaceflights with six passengers each per year on the two Delta spaceships after an initial “ramp-up” period, delivering annualized revenue of $450 million. The company then sees revenue growing to about $1 billion annually with 1,650 seats sold per year.
Virgin Galactic said it is considering building a second spaceport, in addition to its facility in New Mexico, to meet demand.
In July, it announced the completion of its new manufacturing facility in Phoenix, where final assembly of its next-generation Delta spaceships is scheduled to take place starting in the first quarter.
“The completion of our new manufacturing facility is an important milestone in the development of our fleet of next-generation spaceships, the key to our scale and profitability,” Virgin Galactic Chief Executive Michael Colglazier said in a statement.
In June, it also announced a new contract with the International Institute for Astronautical Sciences to fly three research astronauts as part of a future crew aboard the company’s Delta Class spaceship.
That month, it also had a successful final flight of its VSS Unity, which has been suspended as the company rushes to complete the Delta ships. The company has said it has enough cash on hand until 2026 when flights restart.
