SPCE stock price analysis: Virgin Galactic outlook darkens

Virgin Galactic (NYSE: SPCE) stock price continued its strong sell-off this week after the company announced a plan to do a reverse stock. It crashed by more than 10%, moving to an all-time low of $0.85, a sharp decline since it was trading at $62.7 at its peak in 2021.

Virgin Galactic’s reverse split

The ongoing collapse of SPCE share price is in line with a prediction I made two weeks ago. At the time, I warned that the company was at risk of running out of cash as it continued building its next-generation Delta Spaceplane.

Virgin Galactic ended last quarter with more than $900 million in cash and short-term investments. While this is a lot of money, its losses are still high. It had a net loss of over $502 million in 2023.

Virgin Galactic has made steps to reduce its cash burn. It recently laid off 18% of its total workforce but that won’t be enough. 

I believe that SPCE has enough funds for this year, meaning that it will not dilute its shareholders. I also expect that it will raise cash either in 2025 or in 2025 as it continues to build its Delta Spaceplane. Remember, the company has over $417 million in long-term debt.

At the same time, Richard Branson, who has bankrolled the company for years, has warned that he will not be writing checks again as its empire comes under intense pressure. He has already watched the collapse of Virgin Orbit in 2023. Forbes estimates that his net worth has crashed to about $2.5 billion from a peak of $5 billion in 2015.

Therefore, Virgin Galactic’s future depends on how much money it can save and how fast it can complete building the Delta spacecraft. In its most recent statement, the management estimated that it will start commercial service in 2026.

There is a risk to that schedule since the industry is still young, meaning that technical problems and delays are possible. Earlier this year, the company experienced an in-flight hardware issue in its VSS Unity project. 

SPCE stock price forecast

The daily chart shows that the Virgin Galactic share price has been in a strong bearish trend lately. It recently dropped below the key support level at $1.37, its lowest level in October last year. Dropping that level was an important move since it signaled that bears were in control.

SPCE share price remains below all moving averages while the sell-off is gaining steam as the Average Directional Index (ADX) has jumped to its highest point on record. The Relative Strength Index (RSI) has moved to the oversold level of 21.

Therefore, the outlook for the stock is still extremely bearish. However, as it has done in the past, there is a likelihood that it will have a temporary rebound when it completes its reverse stock split.

We have seen many stocks plunge hard after going through a reverse stock split. Some of the most notable names that have crashed after doing that are Mullen Automotive and Canoo.