Who among us as a child did not want to be an austronaut?

Many of us as children had the dream of becoming astronauts. I was one of them. Finally Space Galactic ($SPCE) allows me to make my dream come true! It only takes $ 250,000 to make it happen!

"Just a small amount", were the words of Justin Bibier, Leonardo di Caprio, Brad Pitt, Lady Gaga, Angelina Jolie, Tom Hanks and other 594 people from 60 different countries to be able to realize their dream (or maybe whim?) , and another 8,000 people are waiting to buy their ticket by blocking it for a minimum amount of $ 1000.

Let's get serious again (the above data are real of course) ... What do I think of this company?

Can I call it a bet or something less "risky"?

In the meantime I have opened a small position. So for me it's a BUY.

Let's go see why!

First of all, I must underline that it is a growth stock, so based solely and exclusively on the finance it is useless, in fact their Revenue is zero this year; for these companies that do not generate profits and are developing, I analyze the administration, the Holders of the company, the competitors, the size of the market that it can reach, the development strategy to expand the company and obviously the risks and problems faced or that they may face in the long and short term future.

I will not explain in this post how their space flight system works as well explained in their website: https://www.virgingalactic.com/.

RISK ANALYSIS

I want to first analyze the risks of this company.

Informe anual de Nell under the heading "risks" we read:

“Risks Related to Our Business We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to achieve or maintain profitability. We have incurred significant losses since inception. We incurred net losses of $210.9 million, $138.1 million and $138.2 million for the years ended December 31, 2019, 2018 and 2017, respectively. While we have generated limited revenue from flying payloads into space, we have not yet started commercial human spaceflight operations, and it is difficult for us to predict our future operating results. As a result, our losses may be larger than anticipated, and we may not achieve profitability when expected, or at all, and even if we do, we may not be able to maintain or increase profitability.”

During a test flight in October 2014, Virgin Galactic's SpaceShipTwo spacecraft was destroyed and crashed. A co-pilot lost his life in the crash.

In addition, the test flight on 12 December 2020 did not reach space as expected, The rocket engine did not fire due to the unfinished ignition sequence.

So these news make it clear that their goal is very ambitious. They can suffer significant setbacks that significantly delay their plans.

Last year they had the first flight scheduled for the end of 2020, but the problem in December did not allow them to reach the goal. They currently do not yet have a date to retest.

Shares are also down due to this lack of information. The company sent its fans a note on Christmas Eve assuring them that it is hard at work to understand why its rocket was not launched in the last flight test and is optimistic that it will solve the problem and that it is continuing the work to get his second spaceplane built in time to begin commercial operations.

Positive note is their interest in the safety of passengers and their pilots. Also repeating several times that the December mission was aborted for security reasons.

ADMINISTRATION AND HOLDERS ANALYSIS

Richard Branson I think we know him . For those unfamiliar with him he is a British entrepreneur, founder of the Virgin Group, which has over 400 companies. According to Forbes magazine, in 2020 his assets amount to about 4.3 billion dollars.

Under his "Virgin" brand, numerous businesses appear including airlines, credit cards, pension insurance, car rentals and in 2004 he founded Virgin Galactic.

Michael Colglazier is the CEO

Prior to joining Virgin Galactic, Michael served as President and Managing Director of Disney Parks International. Previously, Michael was the President of The Disneyland Resort in Southern California. Michael had an extensive career at Disney spanning over 30 years, where he drove new businesses and growth strategies across the world with a focus on product innovation and customer growth. Michael is highly experienced in leading both large workforces and start-up teams to deliver business performance and growth. He has considerable commercial and managerial experience and a proven track record of successfully commercializing new and innovative products into world-class consumer experiences.

George Whitesides is the CHIEF SPACE OFFICER

George joined Virgin Galactic in 2010 as Chief Executive Officer of Virgin Galactic and The Spaceship Company, Virgin Galactic’s wholly-owned subsidiary and manufacturer of advanced air and space vehicles. During George’s 10 years with the Company, he built the Company from 30 people to a workforce of over 900 today, successfully guiding Virgin Galactic through its human space flight R&D and flight test program, culminating in two space flights. These historic flights saw the first humans launched into space from US soil since the retirement of the Space Shuttle, as well as the first woman to fly on a commercial space vehicle. George led the transition of operations from Mojave, California to Spaceport America, New Mexico, and oversaw the Company’s successful public listing making it a multi-billion dollar company and creating the world’s first publicly traded human spaceflight venture.

Prior to Virgin Galactic, George served as Chief of Staff for NASA. Upon departure from the American space agency, he received the Distinguished Service Medal, the highest award the agency confers.

He previously served as chair of the Reusable Launch Vehicle Working Group for the FAA’s Commercial Space Transportation Advisory Committee, a member of the Board of Directors of Virgin Galactic, and a member of the Board of Trustees of Princeton University and the Board of Virgin Unite USA. George has testified on American space policy before the United States Senate, the United States House of Representatives, and the President’s Commission on Implementation of United States Space Exploration Policy. An honors graduate of Princeton University’s Woodrow Wilson School, George later earned a master’s degree in geographic information systems and remote sensing from the University of Cambridge, and a Fulbright Scholarship to Tunisia. George is a licensed private pilot and certified parabolic flight coach.

The other team members can be found here:

https://www.virgingalactic.com/who-we-are/our-team/

So I would say that from the administrative point of view they certainly have great capacity and quality.

HOLDERS

It is very important to see how 40% of the shares are owned by the Insiders. Because it is important? The more shares are in the possession of Insiders, the more they believe in their potential. A bit like us small investors, we only invest in stocks that we like and believe in. 40% is an excellent percentage.

Among the Institutional Holders we find Vanguard Group, Inc (4.73%), Blackrock Inc. (2.33%), Morgan Stanley (1.15%), Bank of America Corporation (0.60%) and others.

FINANCE ANALYSIS

There are interesting elements that I would like to analyze with you:

• Number of full-time employees: 721, relatively few, so salaries do not affect the budget much;

• No debts;

• They continue to spend (I prefer the word invest) money on "research and development", very important for this type of company, increasing it by about 22% compared to September 2019. Every year they increase spending more than 20% on this item, so good!

• Cash position remains strong with cash and cash equivalents of $ 742 million as of September 30, 2020.

Furthermore, other important data to be analyzed only related to the "life" of their properties, in the K10 of 2019 we find:

Construction life: 39 years

Planes: 20 years (excellent!) It is in fact reusable planes, so from this point of view the expenses will be limited to the maintenance of these.

Software and crews: 3-5 years.

COMPETITOR ANALYSIS

Although in the short term they are the only ones ready to launch tourists into space, they have competition from BLUE ORIGIN, the space tourism company led by Amazon founder Jeff Bezos $ AMZN, which plans to bring robots to the moon by 2024 and only. after humans. Also Elon Musk $ TSLA's SpaceX, which announced in February 2017, its first flight to the moon with humans in 2023. So theoretically for at least 2 years it has space tourism in its hands. Obviously his type of tourism is completely different from what the other two companies want to offer (but at what price?).

In K10, under the heading "Competition" we find:

“The commercial spaceflight industry is still developing and evolving but we expect it to be highly competitive. Currently, our primary competitor in establishing a suborbital commercial human spaceflight market is Blue Origin, a privately-funded company that is seeking to develop a vertically-launched, suborbital spaceship. In addition, we are aware of several large, well-funded, public and private entities actively engaged in developing competitive products within the aerospace industry, including SpaceX and Boeing. While these companies are currently focused on providing orbital spaceflight transportation to government agencies, a fundamentally different product from ours, we cannot ensure that one or more of these companies will not shift their focus to include suborbital spaceflight and directly compete with us in the future.

We believe our ability to compete successfully as a commercial provider of human spaceflight does and will depend on a number of factors including the price of our offerings, consumer confidence in the safety of our offerings, consumer satisfaction for the experiences we offer, and the frequency and availability of our offerings. We believe that we compete favorably on the basis of these factors.”

MARKET ANALYSIS

We said that the ticket price is currently $ 250,000, which is a very high sum. For now, they have sold 600 tickets to customers in 60 different countries for the maiden flight in the first quarter of 2021.

This is a luxury segment, which nevertheless attracts a growing number of admirers, reaching almost 8 thousand online registrations compared to September 2019. However, it is not yet clear at what price the new seats will be sold, as they reserve the right to change the price.

Thanks to the almost 8000 registrations during the launch of the "one small step" they were able to obtain about $ 8,000,000, in fact a deposit of only $ 1,000 is required during the registration phase to secure a place at the front of the line for future ticket reservations.This strategy is widely used when you need to accumulate a good amount that you can use freely without having to ask for loans and therefore pay interest.

In the "Fourth Quarter and Fiscal 2019 Investor Update" published in February 2020, there is a very interesting section of the "Market Backdrop" that I recommend you read. Among various information, what I found interesting is the development of space trade, which will reach about 5% of the US GDP in 2040. (Source U.S. Chamber of Commerce).

Another important data is the "Significant Total Addressable Market" section

Here is a small excerpt (Source: Credit Suisse Research Institute):

Interestingly, their "target" of people increases by about 6% from 2018 to 2023 and that according to the company's business plan only a small percentage of HNW individuals will be served.

It is evident that their market is extremely narrow, currently 1,88M HNW individuals.

For the uninitiated, HNW means individuals with a net worth of over $ 10 million.

I say now because it is very likely that in the near future their “target” will be reduced (therefore the price of the ticket will be lower) to individuals who have a net worth between 1-5 million dollars.

From the graph we see how accessible people will be many more:

A conclusion of the market analysis I would like to make a small reflection and a comparison of turnover with some airline.

Currently the sale of the 600 tickets alone has brought in a cash flow of 80M (so it is likely that each individual has paid about 50% of the total cost. 600 tickets x 250,000 = $ 150M.

Taking the UAL company as a reference, the highest turnover in 2019 was equal to 43M (about 3.4 times less than VG's 150M). It is clearly just a small example to dare an idea of ​​their revenue with a sale of only 600 tickets.

Let us also remember, however, that while a person can travel several times in a year, it is difficult for an individual to decide to experience this space travel more than once in his life.

Considering that each flight can only accommodate 6 passengers + two pilots, we need 100 flights to send the 600 paying people into space. Currently they have 1 SpaceShipTwo available, but they ensure that before the start of activity they will reach 2, and at the end of 2023 they plan to have 5, this means more flights possible in a year and a higher revenue.

I have not found information about how many flights they have planned in a year, so it is possible that they will not currently be able to send all 600 currently paying people in a single year (to allow this they would have to perform 1 flight every 3 days with only one SST, but I repeat, it's just my guess).

In 2021, ticket sales are expected to reopen after Richard Branson's flight.

DEVELOPMENT ANALYSIS

Now let's go and see the potential of this company. We have already seen how they intend to lower the price of tickets to allow greater ticket sales and thus expand their market.

But aside from sending people into space for this experience, do they have anything else planned?

Let's always see Q4 2019, in the "Growth Strategy III: High Speed ​​Global Mobility" they expand their vision also in the world of air mobility, I am attaching an image that speaks for itself:

Do we realize their potential? Obviously we are not talking about next year or maybe 5 years from now ... But if they really enter this market, the opportunities would be endless.

Let's read:

"Potential opportunities to develop high speed global mobility vehicles that drastically reduce travel time for point-to-point travel

"Significant market opportunity (~ $ 900 billion commercial aviation market and ~ $ 600 billion total commercial passenger travel market)"

Los Angeles - Tokyo in just 2 hours! Incredible.

What else can I add? Their limit is not even the sky anymore!

That's all, I hope I was clear and gave a general overview trying to be as impartial as possible.

For these reasons I have decided to open a position in VG.

When they start the business we will have the opportunity to see the balance sheet well to understand how much the net margin actually is compared to the turnover and the expenses necessary to achieve it.

Their potential is immense .. it all depends on the skills and quality of the administration.

If I have forgotten any important data or news I would like to receive some feedback so that I can correct or implement my analysis.

Goodbye and thanks for reading my post!