After successfully launching its Galactic 05 space-tourism flight back in November, space company Virgin Galactic (NYSE: SPCE) took the month of December off. But on Wednesday, Virgin announced that it will resume spaceflights in the new year with Galactic 06 launching on or about Jan. 26, 2024.
Now here's the weird thing: When Galactic 05 launched, Virgin Galactic stock enjoyed an immediate 10% bounce. Today, Virgin Galactic stock went down 10.8%.
What's wrong with Virgin Galactic?
So what's up with that? You'd think investors would view Virgin Galactic planning its first spaceflight of the new year -- after launching successfully six times in six months in 2023 -- as good news. But instead, investors seem kind of bummed.
Why? In its press release, Virgin Galactic confirmed that Galactic 06 will carry only four paying passengers -- one more than in previous flights but two less than Virgin originally said its VSS Unity spaceplane was designed to carry.
So it could be that investors are crunching numbers and wondering how the four passengers flying aboard Galactic 06 -- paying at most $250,000 per ticket, generating $1 million in revenue for the company -- are going to offset the $300 million-odd in operating expenses ($50 million a month) that Virgin Galactic racked up over the first few quarters of 2023.
What's right with Virgin Galactic?
And that is a good question to ask. On the other hand, though, it's worth pointing out that in 2023's third quarter, the company's most recently reported quarter, Virgin Galactic successfully worked its operating expenses down to just $90 million from an average of $150 million per quarter in the first half.
Granted, that's still a lot more expense than the company is bringing in, in revenue. At a launch cadence of one flight per month, or three flights per quarter, it still leaves Virgin Galactic spending $87 million more per quarter than it brings in, in tourist-flight revenue. But it is progress.
Personally, I don't see how Virgin Galactic is going to get its flight cadence up to a level that can successfully offset all its costs and bring the company up to breakeven, much less earn a profit, for many years in the future. But I won't say it cannot happen. If Virgin Galactic succeeds in continuing to slim its operating costs at the same time it grows its revenue base, it's at least a theoretical possibility that this company will eventually earn a profit.
Here's hoping Virgin Galactic continues to make progress on this in the new year.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
