Virgin Galactic Holdings Inc [NYSE:SPCE] was in a breakout in yesterday’s session. This followed a positive outlook by Bank of America Analysts. According to Bank of America, the space industry holds massive potential for growth, and could hit a market value of $1.4 trillion by the year 2030.
The analysts also noted that since Virgin Galactic is a market leader in this nascent industry, it was uniquely positioned to double in value. Bank of America analysts also pointed to the fact that the company intends to start its first commercial flights in 2021. This analysis has created lots of excitement in the market, and saw the stock rally by 25% in the day.
Over and above excitement around the company’s forays into space tourism, investors are excited that the company has the potential to disrupt the airline industry. That’s because it can use its space planes for point-to-point hypersonic travel. This would mean ferrying passengers at 3 times the speed of sound.
With the potential to drastically disrupt the multibillion airline industry, this company is uniquely positioned to record value growth as a reflection of this potential. If the space industry could see it double in value, then the potential to disrupt a major industry could see it do several multiples that. Tesla is a good example of a company that has gained exponentially by disrupting the auto industry. It has grown to be the most valuable auto company by market capitalization.
Bank of America analysts were cognizant of this fact and noted that the company had an unmatched advantage in vertically integrated manufacturing that could see it easily usher the world into the age of hypersonic air travel. The company has already hinted at a move in this direction. Earlier in the year, the CEO said that they were looking into integrating space vehicles into national airspace systems, and that they hoped to land these vehicles at airports. It is a pointer to the direction the company could take in the future, with a huge effect on its value.
Nonetheless, Virgin Galactic has its risks even as it presents exponential growth opportunities. One of its risks is an accident that would hurt demand in the short-term. Space travel is complex and risky and there is always the risk of a fatal accident. Such would also attract more regulations in the market that could slow down the rate of growth mid-term.
About Virgin Galactic Holdings Inc
Virgin Galactic Holdings Inc is an aerospace company working on space flights for individuals. It also designs and manufactures space vehicles. It is based in Las Cruces, New Mexico.