Down 70%, Is Virgin Galactic a Buy in 2023?
2022 was a challenging year for the stock market, but few companies felt the impact harder than Virgin Galactic (NYSE: SPCE). With its shares down almost 70% in the last 12 months, many investors have lost faith in this space exploration start-up. But is the pessimism premature? Let's discuss whether Virgin Galactic's risks outweigh the rewards.
Virgin Galactic's spectacular fall comes amid an increasingly difficult macroeconomic environment. In early 2022, the Federal Reserve began to raise its benchmark interest rate to fight inflation. This move hurts growth stocks by discounting the future value of their cashflows and changing investors' risk-reward calculations.
For unprofitable companies like Virgin Galactic, higher rates are a double whammy because they can increase the cost of the capital it would need to sustain its cash burn. Third-quarter earnings highlight why cash burn is such a big challenge. With just $767,000 in revenue, Virgin Galactic is a long way from starting its core space tourism operations.
Source Fool.com
