SPCE stock price forecast: Virgin Galactic faces richsession risk

October 27, 2023 08:46 AM PDT | By Invezz

SPCE stock price forecast: Virgin Galactic faces richsession risk — Image source: Invezz

Richsession fears remain

Virgin Galactic has been one of the biggest cash incinerators in Wall Street. The company has spent billions of dollars in the past two decades. And as a public company, it has been a highly dilutive firm. For example, the total number of outstanding shares have jumped from 69 million in 2017 to 336 million today.

Virgin Galactic will likely see weak demand in a high-interest-rate environment. The Federal Reserve has already hiked rates from 0% in 2022 to 5.50%. There is a high possibility that the bank will deliver another 0.25% rate hike later this year.

High interest rates have led to a situation known as a richsession, where the wealthy are starting to cut spending. This situation will likely worsen now that bond yields have surged to the highest level in years. Credit card rates have soared to a multi-year high.

The impact of this richsession is being seen in luxury spending market. As I wrote on Thursday, many luxury goods companies like LVMH, Kering, Richemont, and Hermes have recently published weak financial results.

Watch here: https://www.youtube.com/embed/zG_l_7bCR8g?feature=oembed

Fortunately, Virgin Galactic has a huge backlog of over 800 passengers who have paid between $250k and $400k. These customers will support it in the near term. The challenge for the company is whether it will have more demand if interest rates continue rising.

The other challenge for Virgin Galactic is that it needs a lot of cash in the coming years. Analysts believe that it will generate less than $40 million a year using the current VSS Unity. It will spend over $600 million in this period. The company hopes to launch Delta aircraft in 2026.

SPCE stock price forecast

SPCE chart by TradingView

The daily chart shows that the Virgin Galactic share price has been in a freefall for months. It formed a double-top pattern and moved below the neckline at $2.99 on April 6th of this year. In price action analysis, this is one of the most popular bearish signs in the market.

The stock now remains below the 50-day and 100-day exponential moving averages (EMA). At the same time, the Relative Strength Index (RSI) has drifted downwards. Therefore, the shares will likely continue falling as sellers target the key support at $1.00.

The post SPCE stock price forecast: Virgin Galactic faces richsession risk appeared first on Invezz

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