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Virgin Galactic’s Stock Price Is Soaring but One Man Could Cause Its Crash

Last Updated September 23, 2020 1:46 PM
William Ebbs
Last Updated September 23, 2020 1:46 PM
  • Virgin Galactic’s stock is soaring again after Morgan Stanley’s Adam Jonas gives it an overweight rating.
  • Last month, Jonas called the stock overvalued and asked management to dilute investors
  • While it looks like Morgan Stanley is spot-on with its directional calls, its analysts are exerting a massive influence on the price of the stock.

Retail investors have been on a roller coaster ride as Morgan Stanley analysts repeatedly change their outlook for Virgin Galactic (NYSE:SPCE). Analyst coverage has sent shares soaring from $12.00 to an all-time high of $42.00 before crashing back down again.

Now, shares are up 17% as Morgan Stanley’s Adam Jonas upgrades the ticker to an overweight rating  with a price target of $24 despite no meaningful fundamental changes in the company.

Given Jonas’s track record of contradictory coverage, it may only be a matter of time before Morgan Stanley pulls the plug on Galactic’s latest rally, sending shares crashing back down.

Virgin Galactic Is a Retail Favorite

Virgin Galactic plans to provide suborbital space flights for wealthy travelers as well as scientific missions. Tickets are expected to cost around $250,000 each. 

While the company reports virtually zero profit and revenue, retail investors are excited.  It has built up an impressive backlog of pre-orders and customer interest. Virgin Galactic reported 7,957 registrations of interest in the fourth quarter alone. 

The company also received a $20 million investment from Boeing  which is presumably interested in its hypersonic travel technology.

One Man Is Causing This Stock to Fluctuate

Despite the potential surrounding Virgin Galactic, one man seems to be the driving force behind its stock price fluctuations. Morgan Stanley’s Adam Jonas made a name for himself by covering Tesla  before moving on to SpaceX and now Virgin Galactic.

Jonas started covering Virgin Galactic on Dec. 9, 2020 , with a price target of $22. Since then, investors have been on a roller coaster ride as the analyst continues to update his coverage despite minuscule fundamental changes in the business.

Virgin Galactic shares rocketed 13%  as soon as Jonas published his first report before eventually hitting an all-time high of $42.49 on February 20th. That’s when he decided to pull the rug from under investors. He called for a correction, asking management to dilute shareholders even though they didn’t need the capital.

The stock hasn’t recovered until this week.

Adam Jonas Pumps Virgin Galactic Again

Jonas is contradicting the call he made last month with a new Overweight rating and a bullish analyst note.  He’s giving the stock a price target of $24 based on an adjustment to his space tourism DCF model.

It’s been a wild ride for Virgin Galactic shareholders amid contradictory analyst coverage and the coronavirus pandemic. | Source: ycharts 

The stock soared 17%  in response to the upgrade, settling at around $16.00 as of the market close on Wednesday.

Adam Jonas and his buddies at Morgan Stanley are probably very proud of themselves. It looks like they have a perfect track record with Virgin Galactic. But that’s only because they are the ones pumping and dumping the stock through their relentless and contradictory coverage.

While Virgin Galactic investors will be happy to see Adams Jonas boosting the price today, it’s only a matter of time before he decides the stock is too expensive again and sends it crashing back down to earth.

Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com and should not be considered investing or trading advice from CCN.com.