Preflight operations are ongoing on the Unity SpaceShipTwo vehicle and the company's mother ship Eve.
Virgin Galactic shares fell in trading on Friday after the company's fourth quarter results showed delays in its flight test program. The expected start of its commercial service has now been postponed to 2022.
The space tourism company reported a quarterly loss that was in line with Wall Street analysts' expectations, but the next space flight test of its SpaceShipTwo vehicle "Unity" has been postponed from February to May. The company identified an electromagnetic interference problem with Unity on a new flight control computer. CEO Michael Colglazier said the company anticipates eight to nine weeks of proofreading.
Delays in Virgin Galactic's spacecraft testing program, which had previously been thrown back after an engine stall during a space flight attempt in December, caused the company to postpone its schedule for starting regular space tourism flights.
Virgin Galactic's shares fell 11.9% on Friday, trading at $ 37.23 per share. The share has risen significantly since the beginning of the year and has gained more than 55% since the beginning of the year, even after the decline on Friday.
The new plan for 2021
Colglazier gave investors an updated look at the milestones Virgin Galactic is expected to achieve this year given the testing delays.
The company's next big event won't be Unity, but rather the launch of the second spacecraft in the Virgin Galactic fleet – and the first of its SpaceShip III generation. According to Colglazier, the SpaceShip III vehicle has a "modular design" with "improved manufacturing and assembly processes" that the company expects to enable "better performance in terms of flight rate" and maintenance.
In the meantime, Virgin Galactic will be working this spring to address the electromagnetic interference (EMI) issue with Unity. The company's analysis found that EMI was the main culprit behind the flight abandonment in December, and additional EMI issues during pre-flight preparations resulted in Virgin Galactic withdrawing from a space test expected earlier this month.
"To reduce EMI levels, we will add functionality to the new flight control computer. Once we have completed these changes, we will thoroughly test the system on site in both the lab and Unity and then begin our flight test program again," said Mike Moses, President of Virgin Galactic, on the company's earnings conference call.
Unity's flight attempt in May will effectively be a replica of the December test with only two pilots on board.
Meanwhile, Virgin Galactic expects the first SpaceShip III vehicle "to begin gliding tests this summer," Colglazier said. In addition, the company will begin assembling a second SpaceShip III vehicle.
"Our current flight test protocol for the first SpaceShipThree vehicle is four glide flights and four powered flights, and we expect the space flights to generate revenue," said Colglazier.
A shadowy look at the company's upcoming SpaceShip III generation.
Given Unity's past delays, Coglalzier declined to provide specific target dates for the second space flight attempt, saying only that Virgin Galactic expects it to happen "this summer". Unity's second space flight will carry four passengers along with the pilots – most of the people Virgin Galactic has flown at one time.
Then Virgin Galactic will conduct a third space flight test, in which Unity company founder Sir Richard Branson has been on the road for almost two decades.
The company added a fourth space flight test for Unity as part of a partnership with the Italian Air Force. Colglazier said the flight will carry three passengers and several research payloads that will serve as "suborbital astronaut training" for the Italians. That flight is expected to "take place in late summer or early fall," said Colglazier, and will complete Unity's flight tests.
Virgin Galactic then begins a period of maintenance outages that Colglazier expects to last about four months. The company will carry out an "analysis and rehabilitation phase" with its carrier aircraft Eve, Spacecraft Unity and SpaceShip III.
"We decided to implement improvements and accelerations of the long-term maintenance updates for our mother ship Eve to improve the predictability and frequency of the flight rate," said Colglazier.
Given the downtime, Virgin Galactic now expects "Unity to begin flying private astronauts in early 2022" – marking the start of the company's commercial space tourism service. The company most recently believes that "SpaceShip III will be able to complete its flight tests," Colglazier said early next year.
Wall Street lowers expectations
Virgin Galactic pilots walk to the company's SpaceShipTwo Unity spacecraft attached to the Eve jet carrier aircraft.
Several analysts have adjusted expectations for Virgin Galactic's future results, lowering prospects in light of the testing delays.
"The big news out of print was the redesign of the flight plan," said UBS analyst Myles Walton in a statement to investors.
UBS has a neutral rating for Virgin Galactic and is lowering its price target from $ 52 per share to $ 40 per share. Walton said he saw "a bit more technical risk on the agenda than before", although he was "encouraged by the speed in building a base for economies of scale when the green light is given to commercial operations".
Alembic Global Advisors downgraded Virgin Galactic from overweight to neutral, with the price target shifting from $ 27 per share to $ 39 per share.
"What drives our downgrade is a combination of the stock's current valuation (the stock has risen 78% since more than doubling in 2020) and a fresh outlook from management, the additional investment and longer time it takes to achieve the Passenger travel by consumers who now appear to be on a timeline of early 2022, "Alembic analyst Pete Skibitski wrote in a note.
Credit Suisse analyst Robert Spingarn has adjusted his company's price target for Virgin Galactic from $ 36 to $ 42 per share in view of the stock's strong performance at the start of the year.
"The updated plan, based on higher numbers and newer versions of the spacecraft, will likely take longer than what we considered when we started reporting," Spingarn said.
Credit Suisse pushed back its forecast that Virgin Galactic would achieve a high volume of flights from Spaceport America in New Mexico by 2025 from 2024. Spingarn also noted that Virgin Galactic appears to be "happy" with about 11 quarters of cash on their runway, based on the current quarterly burn rate.
"We now have a higher line of investment which, depending on the pace of further progress and the burn rate, could require additional capital by the end of 2022," noted Spingarn.
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