Virgin Galactic Scores Bullish Call, $22 PT from Cowen

Cowen says buy Virgin Galactic because of its first-mover advantage in commercial spaceflight and exposure to point-to-point hypersonic travel. The research firm initiated coverage of Virgin Galactic with an Outperform rating and a $22 price target.

Vacation for super-rich people: Demand for commercial space travel is strong among the ultra-wealthy. According to a Cowen survey, about 35% of individuals with a household income of $1 million+ are interested in paying $250k or more for a ticket to space, while about 39% individuals with HHI of $5 million+ would consider flying to space at a ticket price of $250k or above. The company currently has about 600 reservations from private-paying tourists. 

Speed sells: Virgin Galactic is also exploring the high-speed point-to-point opportunity, which Cowen estimate to have a total addressable market of about $1 trillion. Assuming a 20% market share by 2050, Cowen says hypersonic travel could translate to about $200 billion in sales by 2050 for Virgin Galactic. 

Upcoming Catalysts: Milestones that could send the stock higher include clearing the final stages of FAA approval, sending Sir Richard Branson to space in 1Q21, and starting commercial operation in 2H21, according to Cowen.