Morgan Stanley believes that Virgin Galactic’s stock price will grow 203% mostly thanks to their plans of organizing hypersonic travels.
Now we know that Morgan Stanley is one of the financial behemoths that we don’t want to mess with when they give an opinion. So many pundits in the aviation sector paid close attention when Morgan Stanley gave indications that Virgin Galactic’s stocks will soar after it gave the stock of the aviation upstart higher ratings than many pundits thought necessary. The investment behemoth’s analyst Adam Jonas explained this position:
“A viable space tourism business is what you pay for today… but a chance to disrupt the multi-trillion-dollar airline [total addressable market] is what is really likely to drive the upside,”
In a positive response to this on Monday, Virgin Galactic’s shares rose 16% to around $8.42 per share. Also, sources have indicated that investors should target aviation unicorn’s shares at $22 apiece which demonstrates a belief in the Virgin Galactic’s ability to compete favorably with others within the aviation sector. While this, of course, represents a 203% increase in share prices from today’s prices, it is still a valuation that while being highly optimistic is also inherent with risks associated with the industry.
Investment analysts at Morgan Stanley, however, haven’t based their projected valuations on the space business of Virgin Galactic, but rather on the hypersonic plane travels of the business which is part of a tri-phase business model. The first two phases of the business model include 90-minute space travels for customers who can afford them and extended space travels. These options are expected to become available within a decade. And the third part of this model presupposes the launch of point-to-point hypersonic travels for business travelers and those who want to get to their locations in a hurry. Namely, this phase is said to be a big boost in the business of Virgin Galactic.
It is this aspect of the business that has a higher potential for business growth and expansion as the analysts put it:
“While some investors have described high-speed hypersonic P2P travel air travel opportunity as ‘the icing on the cake,’ we see Hypersonic as the cake and the icing, with Space Tourism as the oven.”
However, it is important not to forget about all the kinds of risks that such business poses despite the promise of great returns and a great business model that is certain to thrive, it is still not a traditional business. Moreover, the offers themselves are targeted at a rather wealthy audience that is rather limited. But it doesn’t seem that these risks mat stop Richard Branson and the company who are set to take over the world with their unique ideas about air travel come 2020 and beyond.
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