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Virgin Galactic Holdings (NYSE: SPCE) may have experienced a brief speculative frenzy during last summer's space stock boom, but in recent months, arguably more game-changing news has emerged from the private spaceflight company.
Not only is Virgin Galactic months away from launching its first commercial flight, but it successfully sold out its initial offering of flight tickets, even after raising the price from $600,000 per person to $750,000. Yet while management has boasted that this will significantly reduce its near-term cash burn, is this strong demand arriving just in time, or is it too little too late?
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Back in August, Virgin Galactic released its second-quarter results. While bottom-line losses and cash burn were expected for this pre-revenue company, management highlighted a few green shoots in its guidance for the quarters ahead. In addition to announcing that it had paid down around $58.4 million in outstanding debt, the company revealed promising news about rising demand and ticket prices for its upcoming commercial flights, set to begin in February.
Its latest tranche of tickets, priced at $750,000 each, sold out, and CEO Michael Colglazier said he expects the company to "deliver positive quarterly cash flow within 2027." Figures provided in the second-quarter earnings presentation support the argument that rising demand and increased pricing power are paving the way to profitability.
From its initial fleet alone, Virgin Galactic expects to generate $450 million in annual revenue, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $90 million to $115 million. This would represent a significant reversal given that during Q2 alone, Virgin Galactic reported negative free cash flow of $90.7 million.
Over a longer time frame, if Virgin Galactic successfully expands its fleet, and then expands to two spaceports, expect an even more outsized impact on financial results. Management's estimates are that an expanded fleet would generate between $450 million and $500 million in adjusted EBITDA, and predict that with an expansion to two spaceports, the company would generate $1 billion to $1.1 billion in adjusted EBITDA.
Yet, while Virgin Galactic appears on the verge of a serious inflection point, is now the time to buy? While a path to profitability may exist, it's less certain whether that pivot from cash burn to positive cash flow will occur on time. For the second half of 2026, management is guiding for cash burn of up to $190 million. Virgin Galactic reported $286 million in cash on hand as of June 30, but much of that came from its recent $134 million at-the-market (ATM) equity offering.
To shore up its balance sheet, the company may need to sell additional equity, which would dilute existing shareholders. Even if Virgin were only to raise another $100 million, this would still cause serious shareholder dilution given the company's current market cap in the neighborhood of $350 million. With Virgin Galactic stock once again on a downward trajectory, and its next quarterly report nearly a month away, you should probably sit and wait for a better entry point, even if you're bullish on its long-term prospects.
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Thomas Niel 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.
Richard Branson's Virgin Galactic Reopened Ticket Sales at $750,000 a Seat in 2026, Up From the $600,000 It Charged for 700 Previously Sold Seats. Is SPCE Stock's Pricing Power Finally Catching Up to Its Cash Burn? was originally published by The Motley Fool
