Credit: Virgin Galactic
I wrote in one of my posts that having a Virgin Galactic stock (SPCE) is a must own if you are a fan of the Rocket Space Industry for the next decade. If 2020 has been especially active for a stock that is Tesla stock, one I have been talking about for years now as it is one of the hottest companies possible coming at the right time. But let's not focus on what happened but what is about to happen to one of Elon Musk’s friends, Sir Richard Branson.
For those of you not familiarized with Richard Branson he is more present in our daily life as you may see. Not only is he one of the people alive with the most companies under his private control (almost all with Virgin in the name) or has he been knighted, but he is also present in the Time 100 Most Influential People in The World list and appeared as one of the inspirational figures in 1997 Apple commercial “Think different” (and my personal favorite his cameos in the film Casino Royale and the TV show Friends).
I could write for hours about Richard Branson but I would rather recommend that you read “Screw it, let's do it”. This 128 page easy-reading book will guide you through the main milestones Richard Branson has achieved during his 70 years of life and 50 years of Virgin history. (By the way, the book used cost only 0.50€ on Amazon).
One of the dreams he wrote about was to become an astronaut… who doesn't dream about becoming an astronaut? After so many achievements of his long life trajectory something was missing, something that his friend Elon Musk was starting to think about and that soon enough will also make Jezz Bezos join in: Space tourism. So Branson decided to start his own company for space tourism: Virgin Galactic. It won't focus on going to the moon or Mars, it won’t even go as high as the ISS, but it will take you high enough to feel no gravity and admire the curvature (or flatness) of the Earth. You will feel like an astronaut.
The price: 250.000$. Is it expensive? Is it worth it? Let’s do some numbers, follow me. According to analysts at Cowen, 39% of the very rich people in the USA (net worth over 5 million US Dollars) are interested in space tourism. Only in the USA there are 2.3 million people with this net worth, meaning that almost 900 thousand people would be interested in going up there. This estimate is only, as I said, for the people with 5 million net worth (not more, not less) and only in the USA.
At the moment there are not many options, we are talking about only three companies actively working to offer this kind of space travel (Blue Origin, SpaceX and Virgin Galactic). While some others (like NASA) are interested in opening their doors (or the ISS doors) to welcome space tourism, at the moment there is nothing specified about when they will offer these services.
So we are with 900 thousand people waving their money to buy a ticket to go up there, the options are Blue Origin, SpaceX and Virgin Galactic.
Blue Origin will sell the tickets for around the same amount of money as Virgin does. The main difference is that you will have a more “astronaut experience” as they will do a vertical flight. It will last around 11 minutes and will go all the way up to 110 km (about 22km higher/more than Virgin Galactic).
SpaceX is at the moment too busy launching satellites and real astronauts to the ISS, so the amount of information in the space tourism program is really nothing clear. We will have to wait for the details but we know that their Dragon Cabin could be usable for this kind of tourism, flying at approximately the height of the ISS (nothing confirmed).
And Virgin Galactic, at the moment the only one actively selling tickets. Even if it is the least “astronaut experience” out of the three, it is the most realistically available for most of the people. Because of the soft launch and landing, the preparation people will need is small and not flying higher than 88 km is an issue solved by the 90 minutes flight you will enjoy.
So back to the numbers, if Virgin Galactic only manages to attract 10% of the customers willing to go up, this will mean around 90.000 tickets sold (10% of the 900 thousand 5million net worth people in the USA interested in space tourism). This would mean 22,5 billion Dollars earnings with a really tiny portion of the market, or 6 times their actual market price.
But the story doesn't end there… As Tesla did with their first Roadster, the idea of selling these tickets for 250.000$ is not to have a business model around rich people, but to use this money to develop new technologies and cheaper space tourism options. One very clear next step is the supersonic flights combining the traditional jet engines and the rocket engines that could make London to New York in only 90 minutes… 90 minutes!! The Concorde has the actual record in 2 hours 52 minutes and this could potentially reduce it almost to half that time.
My forecast for Virgin Galactic is that they will pop way over 180.000 tickets sold after the first flights success (hopefully beginning 2021 as they were delayed due to Corona stops and test flights) meaning earnings of around 45 billion within the next decade. At the same time they will develop a technology that could potentially line up with Rolls Royce jet engines while working together with Boeing for the use of these engines in some of their models. Seeing this potential not only in net sales but in technology development and the disruption of the flying industry and space tourism I dare to say that their stock value could easily jump to the 150$/stock (around 30b market cap) during the next year and up to 2.000$/stock (around 400b market cap) during the next decade or 15 years. This means the stock popping a very interesting 700% within a year and nearly a 10.000% within the next decade.
The ideas here written are my personal opinion about Virgin Galactic. I don't receive any benefits neither from Virgin Galactic nor from any VG investors.
R. Branson, E. Musk and T. Blair during a weekend holiday in Necker Island. Apparently Elon Musk had received bad news about Tesla (then beginning) according to Elon Musk book. Credit: Reddit