the stock continued its wild ride Thursday. Shares soar as the company prepares to launch co-founder Sir Richard Branson into space this weekend. The move appears to be another case in point of the investment saying ‘buy rumors, sell the news.’ If that’s what happens, investors may want to consider trimming positions before the weekend.
Virgin Galactic shares (ticker: SPCE) rose 17.3% on Thursday. That
Dow Jones Industrial Average,
for comparison, both are down approx. 1%. Stocks are down after Japan declared a new Covid emergency related to Delta variant infections.
For Virgin Galactic, there is not much new to determine Thursday’s winnings. The stock has jumped from around $ 15 to more than $ 50 since the beginning of May, after the company got its test flight program back on schedule. Completion of test flights will ultimately lead to the start of commercial operation.
Recently, test flights have been enough to get the stock moving. Shares jumped 28% on the first trading day after the company completed a manned test flight on May 22nd.
Virgin Galactic shares jumped another 39% on June 25 after the company received its license from the Federal Aviation Administration to transport paying customers. It was a major reaction to a major catalyst.
Virgin Galactic investors are apparently becoming dependent on stock catalysts. And on Thursday, it appears they are bidding shares in hopes of repeating those two quick gains. The next catalyst for the stock is a test flight scheduled for July 11, which will include Virgin Galactic co-founder Sir Richard Branson.
The flight was scheduled for July 1st. “I truly believe that space belongs to all of us,” Branson said in a July 1 press release. “As part of a remarkable crew of mission specialists, I am honored to help validate the journey our future astronauts will undertake and ensure that we deliver the unique customer experience that people expect from Virgin.”
The problem for investors is that when catalysts are known in advance, stocks are sold when the event is over. Virgin Galactic stock fell approx. 5% the day after the jump of 28%. Nevertheless, shares are marching up to approx. $ 40 before the FAA license was granted. But after the test jump, the stocks were still below where Wall Street thought they were worth.
On May 24, the first trading day after the May 22 test flight, the average analyst price target was approx. Shares closed that day at around $ 27. The average analyst price target is $ 35 and the stock closed at $ 52.69 on Thursday.
The deviation increases the risk of a plane sale after Branson. The market is always looking ahead, which means the value of a Branson flight will be in stocks before the flight actually takes place. Investors might want to think about it as they consider holding all of their shares next week.
Year to date, investors are certainly happy with their Galactic investment. Shares have risen by approximately 122%.
Write to Al Root at firstname.lastname@example.org