SPCE stock price forecast: sell Virgin Galactic and don’t look back

Virgin Galactic (NYSE: SPCE) stock price has come under intense pressure amid rising going concerns risks. The shares plunged by more than 17% on Monday after Richard Branson ruled out making further investments in the company. They then fell to $1.88 in the pre-market session.

Virgin Galactic is one of the riskiest companies to invest in. The company has operated for almost two decades, burning billions of dollars along the way. It has spent this time doing R&D and building products that it hopes will help boost space tourism.

Virgin Galactic has achieved a lot during this time. However, it still lags behind other space technology companies like SpaceX and Blue Origin, which have become multi-billion dollar entities in the past two decades.

Virgin Galactic recently canceled its low-capacity commercial flights as it works on its larger spaceships, which are expected to start operations in 2025. It did that after watching Virgin Orbit implode a few months ago.

The risk for Virgin Galactic and its shareholders is that dilution is likely to happen in 2023. The company ended the last quarter with almost $1 billion and hinted that these funds are enough to take it to 2025. It recently announced some job cuts in a bid to preserve cash.

The challenge is that SPCE is losing hundreds of millions of dollars every quarter. It lost $104 million in the third quarter after losing almost $600 million in the previous four quarters combined.

Therefore, if this trend continues, the company will need to raise additional capital either in the fourth quarter of 2024 or in early 2025. In an interview with the FT, Richard Branson warned that he was not ready to add more funds in the company.

There are also other risks that SPCE investors should be worried about. For example, there is an elevated risk that the flights will be delayed. We have seen such issues several times in the commercial flying industry. Also, the beginning of flights will not be the end of its troubles. I suspect that SPCE will need a few more years before it becomes profitable.

SPCE chart by TradingView

I have warned about Virgin Galactic several times as you can read here and here. In all these articles, I have argued that SPCE was one of the riskiest investments in Wall Street because of its losses and the nature of its business.

Turning to the daily chart, we see that the Virgin Galactic stock price has been crawling back in the past few weeks. Along the way, it formed a rising wedge pattern, which is one of the most bearish signs in trading.

The stock also remains below the 50-day and 100-day moving averages. Therefore, I suspect that the shares will soon have a bearish breakout and retest the support at $1.37, the lowest level in November.

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