Shares of private spaceflight company Virgin Galactic (SPCE) are down in today’s trading as investors await its Q4 earnings results on February 26 after the market closes. Analysts are expecting earnings per share to come in at -$3.10 on revenue of $2.5 million. This equates to a 40.4% increase in EPS and an 11.03% decrease in revenue.
Interestingly, though, it is worth noting that Virgin Galactic has seen its EPS figure trend higher during the past six quarters, which has led to a winning streak in terms of earnings beats despite making no progress when it comes to revenue growth. This can be mostly attributable to falling operating expenses, such as research and development, as well as selling, general, and administration costs.
However, cutting costs by itself will not be enough for the company to sustain itself due to its insignificant amount of revenue relative to its massive cash burn rate. Furthermore, there are no revenue-generating flights expected until 2026 as Virgin Galactic develops its new fleet of spacecraft, which means there likely won’t be any meaningful catalysts anytime soon. Therefore, any delays in its aircraft development could become a serious risk factor.
Options Traders Anticipate a Large Move
Using TipRanks’ Options tool, we can see that options traders are expecting a 14.7% move from SPCE stock in either direction right after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement.
It is worth noting that SPCE’s after-earnings price moves in the past 12 quarters have mostly been smaller than the 14.7% that is expected. This implies that current option prices might be overvalued.
Is SPCE Stock a Good Buy?
Turning to Wall Street, only one analyst, Douglas Harned from Bernstein, has covered SPCE stock in the past three months, and he is not optimistic. Indeed, he has a Sell rating with a $3 per share price target, which implies a nearly 28% drop on top of the stock’s 88% decline over the past year.
