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Why Virgin Galactic Stock Fell 16.4% in December

The Motley Fool logo The Motley Fool 1/8/2022 Brett Schafer

What happened

Shares of Virgin Galactic (NYSE: SPCE) fell 16.4% in December, according to data provided by S&P Global Market Intelligence. The space tourism company, which was one of the hottest stocks coming out of the March 2020 market lows, has seen its share price deflate recently along with other popular stocks. It also is likely being affected by the progress made by its space tourism competitor, Blue Origin, in recent months. 

As of Jan. 8, Virgin Galactic stock is now down 46% in the last three months alone. 

So what

In early December, Blue Origin completed its third space flight under its newly launched tourist program, taking ex-NFL star Michael Strahan and five other customers up into space. While still in its early days, this brings Blue Origin's astronaut count up to 14.

Virgin Galactic, its main competitor in space tourism at the moment, has only flown one mission, with its founder Richard Branson and five other crew members. Virgin plans to open up its commercial service in the fourth quarter of 2022, putting it well behind Blue Origin right now. This is possibly making investors in Virgin Galactic nervous, as Blue Origin could end up stealing customers from Virgin if this lead is maintained or widens in the coming years.

A rocket launching into space. © Getty Images A rocket launching into space.

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What's more, small-cap growth stocks (which Virgin Galactic is) have taken a beating recently. For example, the small-cap growth group is trailing the S&P 500 by 13% over the last three months, with a lot of that underperformance coming in December. This could have exacerbated Virgin Galactic's losses last month.

Now what

No matter what price Virgin Galactic stock trades at, it is still a speculative investment in a business that has generated minimal revenue so far in its history. If you are bullish on the space economy and think space tourism will become popular in the next decade, then now could be a good time to pick up some shares in one of the few companies developing a tourism service.

But if riskier investments are not your style, it is probably smart to stay away from Virgin Galactic stock, no matter how far shares end up falling. 


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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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