The Virgin Galactic Scoop: Welcome the King of Meme Stocks!

With yesterday’s launch of the first Virgin Galactic (SPCE) trip with Richard Branson on board, we must congratulate ourselves with the appearance of a new meme stock – perhaps, the king of all meme stocks. How many celebrities can these trips accommodate and what is the expected visitor return rate of this business?

Various existing assessments suggest that for the current SPCE stock price to be justified, free cash flow for its first self-proclaimed milestone in 2022 should be no less than $30 million (which is attainable, to be fair) and grow at a CAGR of around 400%. Revenue should be $100–120 billion by 2027.

The current and expected market capacity suggests this is an unrealistic scenario. Therefore, the current price of Virgin Galactic can only be explained by welcoming of the new kid, the king of meme stocks, on the block. This fact doesn’t necessarily mean SPCE will tailspin tomorrow, but rather it means the stock price isn’t based on fundamentals, which points to a very unsustainable investment, potentially ready to nullify itself at any time.

The initial calculation is quite simple. The ticket for your lifetime experience costs $250K. That must be multiplied by the currently confirmed 600 applicants. The exploitation cost, fuel and insurance must be deducted from the resulting number.

Having said that, we must admit that the news is indeed dazzling. Branson is now the first billionaire to fly into space in his own spacecraft. Amazon founder Jeff Bezos plans to make a similar flight on July 20. This "space race" was launched by Bezos. In May, Branson announced the first manned flight of the New Shepard reusable suborbital rocket system. Amazon.com founder Jeff Bezos himself and his brother Mark should go on the next flight, while the names of the other two passengers were not immediately called. This goes with a string attached: Jeff Bezos pledged 10 billion dollars to help combat climate change, which poorly corresponds with a possibility of the frequent launching of a rocket almost the size of the Saturn V moon rocket.

Attempts to commercialize use of air and space aren’t new at all. In fact, they are almost as old as the first human space launch. Let’s discuss something more basic. Helicopter exploitation costs around $600 per hour, and it can safely fit 5 passengers on top of one pilot. Assuming that the average daily ride is two hours, a person needs to earn around $1000 a day to stay within his or her budget to use helicopters for a job commute. Economy of space ships exploitation is totally outrageous in this sense. On top of that they burn a lot of fossil fuel. Rocket launch emissions can include black carbon (aka soot) as well as CO2. The higher a spacecraft flies, the more fuel it requires. The Space Shuttle orbiter required almost 720 thousand kilograms of liquid fuel and 500 thousand kilograms of solid rocket fuel to reach space. Virgin Galactic likens the carbon footprint for passengers to a business class return ticket on a trans-Atlantic flight. Using data from the International Civil Aviation Organisation, that means about 1238 kilograms of CO2 per passenger.

The journey lengths are not the same, however. A return trans-Atlantic flight covers about 11,100 kilometres. Virgin Galactic’s trip up and down adds up to about 100 miles (160km). Per passenger, per kilometre, the CO2 emissions are 12 kilograms of CO2 for Virgin’s space trip versus 0.2 kilograms of CO2 for the commercial airline flight.

So, once again, let’s welcome the king of meme stocks! Enjoy the ride!