MW Virgin Galactic's new spacecraft looms large as company eyes future profitability

By James Rogers

Space-tourism company will start assembling the first of its new Delta-class spaceships in Phoenix next month

Virgin Galactic Holdings Inc. says it is making progress building its new Delta-class spacecraft, which it says will help unlock the company's future profitability.

The space-tourism company $(SPCE)$, which reported fourth-quarter results Wednesday, has not reported a quarterly profit since going public in 2019. However, Virgin Galactic has high expectations for its new Delta-class spacecraft, which will make its debut next year. The company completed the final commercial flight of its Unity spacecraft last year.

Speaking during a conference call to discuss the results, Virgin Galactic Chief Executive Michael Colglazier said that the new spaceships will unlock "growth and profitability" at the company.

"2024 was the year we designed our new spaceships," he said, according to a FactSet transcript. "2026 will be the year we fly our new spaceships. But 2025 is the year we actually build the first of these amazing new vehicles."

Related: Space stocks skyrocket after Trump vows to 'pursue our manifest destiny into the stars'

On Wednesday, Virgin Galactic announced that the first Delta spaceflight is planned for summer 2026, with private-astronaut spaceflights expected to start in the fall of 2026. "We have made tremendous progress with the fabrication of tools and parts, and assembly of the first spaceship begins next month in Phoenix," Colglazier said in a statement.

Analyst firm KeyBank Capital Markets maintained its sector-weight rating for Virgin Galactic in a note released Thursday, but improved its fiscal 2025 free-cash-flow estimate to a burn of $433 million from $478 million. "We expect FCF burn to lessen as 2025 progresses," wrote KeyBanc analyst Michael Leshock, in the note.

KeyBanc is positive on Virgin Galactic's schedule for its Delta-class spaceships. "We expect Delta's first glide test will occur approximately three months prior to its entry into commercial service," wrote Michael Leshock. "SPCE can achieve this timeline, in our view, upon continued execution."

Related: These are the space stocks to watch in 2025

"The engineering/design work has been fully completed, which was one of SPCE's largest hurdles to progress toward bringing Delta-class ships into commercial service," Leshock added.

During the fourth quarter, Virgin Galactic's revenue fell to $429,000 from $2.81 million in the prior year's quarter, although this was driven by the company's pause in commercial spaceflights while it develops the Delta spacecraft.

With the two Delta-class spaceships and current pricing of $600,000 per seat for private astronauts, Virgin Galactic expects to achieve an annualized level of approximately $450 million of revenue, said CFO Doug Ahrens, during a conference call to discuss the results.

Related: Virgin Galactic building the foundation for strong future profitability, KeyBanc says

"Because of the tremendous value being delivered to our astronauts at current pricing of $600,000 per seat, our contribution margins are forecasted to exceed 80%, resulting in adjusted Ebitda of about $100 million per year with just our first two spaceships in service," he added, according to a FactSet transcript. "Profits have the potential to grow exponentially as we add spaceships and another launch vehicle to our fleet at Spaceport America in New Mexico."

Set against this backdrop, Virgin Galactic is poised to be the space tourism leader, according to KeyBanc Capital Markets.

"We believe SPCE's long-term targets are highly attractive, and it is now building the foundation to achieve strong future profitability," wrote KeyBanc's Leshock, in the note. "Our long-term view remains intact as we believe SPCE is positioning itself well to be the leader in space tourism once operations are scaled, though this is capital-intensive and likely one to two years away."

Related: Virgin Galactic's stock rises as company completes manufacturing facility for new Delta spacecraft

"SPCE has successfully established its credibility via Unity, and the focus is now on scaling operations with Delta-class in the longer term," he added.

Virgin Galactic shares were up 1.8% Thursday, and the stock is on pace to snap a four-day losing streak. The stock is down 88.8% in the past 12 months, compared with the S&P 500 index's SPX gain of 15.6%.

-James Rogers

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 27, 2025 15:54 ET (20:54 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.