Virgin Galactic continues to be a favorite amongst Wall Street analysts, despite the failure of the space tourism company's SpaceShipTwo Unity rocket this past weekend.
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Credit Suisse analyst Robert Spingarn kept his outperform rating and $26 price target on the Richard Branson-led company, noting that additional test flights could be delayed, but the long-term scenario is still intact.
"While we had expected some profit taking post-event, today’s sell-off is likely to be driven by investor concerns about the catalyst timeline," Spingarn wrote in the note. "Although this weekend's powered test flight was not a success, the silver lining is that [Virgin Galactic] was able to prove that its built in fail-safe scenarios worked properly enabling SS2 to glide safely back to Earth without jeopardizing the safety of anyone on board. The successful triggering of fail-safe scenario should help quell some investor concerns over the risk of a catastrophic event as SPCE begins commercial operations."
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Morgan Stanley analyst Adam Jonas echoed these sentiments, telling investors that "it seems [Virgin Galactic] has identified the problem and has spare engines ready for replacement."
"Any further delays would have to be far more significant and extenuating to exert material financial pressure on the company, in our view," Jonas wrote in a note to investors. "The underlying narrative and opportunity offered by the stock is unchanged in our opinion. While short-term speculation around the upcoming test flight catalysts has lifted the shares materially above our $24 price target, we believe SPCE shares offer potential to achieve our $54 bull case with successful execution of its test flights from here."
Shares fell more than 17% on Monday, their worst one-day decline in several months, as the company provided an update on its test flight program.
Virgin Galactic said it is conducting post-flight analysis, adding "the onboard computer which monitors the propulsion system lost connection, triggering a fail-safe scenario that intentionally halted ignition of the rocket motor."
On Saturday, a Virgin Galactic test flight ended prematurely as the rocket motor of SpaceShipTwo Unity failed to ignite and it then glided down safely to its landing site in southern New Mexico.
“The ignition sequence for the rocket motor did not complete. Vehicle and crew are in great shape," Virgin Galactic tweeted on Saturday. “We have several motors ready at Spaceport America. We will check the vehicle and be back to flight soon."
The company's CEO, Michael Colglazier, added the test provided "the foundation of every successful mission."
In the update, Colglazier added that the company remains "focused on the test flight program we have previously announced, beginning with a repeat of this test flight, which included two pilots and NASA payloads."
Shares of Virgin Galactic were rising on Tuesday, gaining 0.64% to $26.67.
FOX Business' Paul Best and the Associated Press contributed to this story.