After soaring 144% since the start of the year from just over US$23 to almost US$57, the Swiss bank downgraded to a ‘neutral’ rating, but upped its price target to US$52 per share from US$35.
The UBS analysts said they “remain convinced in the fundamentals” of Virgin Galactic’s space tourism offering and “the scarcity of the experience provided to customers”, in particular.
Levels of interest in the space industry and excitement around space-focused stocks continue to grow, the analysts noted, helped by a steady flow of news, including the recent announcement of a new space industry focused ETF, space assets joining public markets via SPACs, or operational progress for the likes of SpaceX and Blue Origin.
At this point, although SpaceX has this month confirmed its first space tourism contract, the analysts said they see both SpaceX and Blue Origin’s progress as “reinforcing versus cannibalizing demand for Virgin Galactic, with cannibalization unlikely to be a real factor until late in the decade, in our view”.
However, the analysts said they are mindful of a valuation that “appears full” following the extraordinary gains since the start of the year and over 250% rise since early September, hence the downgrade.
At the end of this week, Virgin’s launch window will be reopening for another test of powered flights, following the failure in December.
Assuming a successful suborbital flight, this will put the company on a trajectory to complete its test program and start commercial operations in the second half of this year.
“While the catalyst chain is appealing, it does seem priced in,” the analysts said.