Why good news for SpaceX is bad news for Virgin Galactic Stock today

What happened

The third time was the charm of SpaceX last night. After consecutive landing attempts with the company’s prototype SN8 and SN9 Starship rockets ended in fireballs on the southwestern Texas Plain last month, at 6:20 p.m. EST yesterday, the SN10 spacecraft from SpaceX has finally “stuck landing. “

And Galactic Virgo (NYSE: SPCE) the stock is down 3.3% (as of 11:30 am EST) today because of this.

Image source: Getty Images.

So what

What does one have to do with the other? Well, think of it that way. Right now, Virgin Galactic’s business model is based on the idea that it can sell trips to the edge of space, a few minutes of weightlessness, and then back to Earth – probably all in less than one hour – for $ 250,000 per person, carrying six clients per flight.

Give credit where credit is due: It’s an incredible promise that Virgin Galactic is making, and it’s a unique and first-in-history offering to bring space tourism to the (well-heeled) masses.

But here’s the problem: SpaceX has just proven that it can fly a fully reusable spacecraft at altitude and bring it back to Earth safely. While there are many, a lot the issues remain to be resolved (the SN10 actually exploded on its landing pad, apparently for no good reason, sometime after its successful landing), once SpaceX has everything in place it should be able to fly the tourists not only to the edge of space, but actually orbit – or to the moon – 100 passengers at a time.

Now what

This story is even better for space fans, but even worse for Virgin Galactic investors. SpaceX has made it clear that it intends to have Starship certified to carry human passengers by 2023. Elon Musk further indicated that he expects the operating cost, per flight, of Starship is around $ 2 million.

Put in an operating cost of $ 2 million, a capacity of 100 passengers, and a schedule of 2023, and what do you get? Potentially, SpaceX could offer space tourism tickets for as little as $ 20,000 apiece in just two or three years – and Virgin Galactic could have. serious competition on his hands.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Sally Dominguez

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