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Bear of the Day: Virgin Galactic (SPCE)

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Before the pitchforks are pulled out on me for this one, I want to specify what it is we try to accomplish here with our Bear of the Day. This is not a “hit piece” nor is it a smear campaign against this stock. All I do here is point out stocks which have seen earnings estimates retreat as of late. This may be of concern for some folks out there, or it could be a total non-issue. I am not here to make up your mind either way on the subject, just point out something we are seeing in our database.

Today’s Bear of the Day is crowd favorite Virgin Galactic (SPCE - Free Report) . Virgin Galactic an integrated aerospace company, develops human spaceflight for private individuals and researchers in the United States. It also manufactures air and space vehicles. The company's spaceship operations include commercial human spaceflight, flying commercial research, and development payloads into space. In addition, it engages in the design and development, manufacturing, ground and flight testing, and post-flight maintenance of spaceflight vehicles.

Virgin Galactic is a Zacks Rank #5 (Strong Sell). What is the reason for the unfavorable rank? Analysts all over Wall Street cutting their earnings estimates. Over the last thirty days, three analysts have cut their current year earnings estimates while two have followed suit for next year. The bearish moves have dropped the current year Zacks Consensus Estimate to a $1.26 loss, worse than the $1.05 loss previous forecast. Next year’s numbers have fluctuated a bit, going from a 58-cent loss ninety days ago to a 65-cent loss, back up to 50 cents, now at 54 cents.

Next year is when things could get very good for the company. With space flights set to commence, next year’s revenue is forecast to come in over $50 million. Just to put that in some perspective here, the current market cap of the company is $4.9 billion…with a B. As revenues ramp up in the coming years, you should expect this valuation to reel in considerably. It just feels a bit nebulous as to how much you should be willing to pay for that future growth as far away as it is in this budding industry.  

The Aerospace – Defense industry currently ranks in the Bottom 11% of our Zacks Industry Rank. There is one stock in that industry ranked higher than a Zacks Rank #3 (Hold), that’s Textron (TXT - Free Report) with its Zacks Rank #2 (Buy). Several stocks are Zacks Rank #3 (Hold) including General Dynamics (GD - Free Report) .

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Textron Inc. (TXT) - free report >>

Virgin Galactic Holdings, Inc. (SPCE) - free report >>

General Dynamics Corporation (GD) - free report >>