SpaceX is one of the most popular growth stocks at the moment for retail investors to talk about. Some think it’s a great buy, others think it’s overvalued. Yet one thing is certain, the space sector and related projects has huge growth potential. So is this alternative a better option when looking for large gains?
The space scene
I’m talking about Virgin Galactic (NYSE:SPCE). Ironically, at first glance it looks like one of those stocks where the share price chart looks more like something falling back to Earth than heading into space. Over the past five years, the ‘growth’ stock’s down 99%, but it’s up 4% in the last year.
The company wants to make commercial human spaceflight accessible to wealthy private customers and researchers. Its next-generation vehicles are designed to carry six passengers and, eventually, fly as frequently as twice a week.
That makes comparisons with SpaceX inevitable, but the businesses are actually very different. Both are attempting to commercialise space using reusable technology, and both can carry private individuals.
Yet Virgin Galactic is predominantly a suborbital tourism business. Passengers experience space and weightlessness before returning to Earth without completing an orbit. SpaceX operates orbital spacecraft and rockets, launching satellites and astronauts.
A key difference
In investment terms, I think Virgin Galactic is currently a much narrower bet on space tourism, rather than a broader space play like SpaceX. That helps explain why Virgin Galactic shares have been such a disaster for long-term investors.
The company retired VSS Unity after its June 2024 flight and has effectively spent the subsequent period generating little commercial revenue while trying to redevelop. Repeated delays and enormous development costs have progressively damaged confidence.
The latest setback arrived earlier in August, when Virgin pushed the first commercial Delta flight from late 2026 to February 2027.
Some optimism
One thing that strikes me is that Virgin Galactic isn’t worth what it once was because investors have largely stopped giving management credit for future promises. If this changes, the company could move rapidly from development story to revenue-generating operator.
Demand doesn’t appear to be the problem. Virgin’s latest ticket allocation at $750,000 per seat was oversubscribed, and management now intends to offer another tranche at an even higher price. The company expects its second spacecraft to enter service in March 2027 and is targeting 10 or more flights a month by the end of Q2 2027. Management believes positive cash flow could follow during 2027.
The operating leverage could therefore be enormous. Two spacecraft completing 10 flights monthly with six passengers each implies theoretical capacity for around 720 passenger seats annually before considering research missions or downtime. At today’s ticket prices, the revenue opportunity starts becoming meaningful surprisingly quickly for the growth stock.
As we currently stand, I don’t think either Virgin or SpaceX can make me rich from buying the stocks. But if an investor had to pick one that had a small potential to win big, I’d think Virgin. Today’s battered valuation leaves considerable room for the stock to surge if it can hit space flight milestones over the coming year or so.
Should you invest £5,000 in Virgin Galactic right now?
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Jon Smith does not hold any positions in the companies mentioned
