Virgin Galactic is “pure hype action”, says trader after big rally

Virgin Galactic took off last month.

Shares have risen more than 60% since early November – adding another 6% on Tuesday after NASA awarded the company a contract for space flight and integration services.

Mark Tepper, president of Strategic Wealth Partners, however, disagrees.

“It’s pure speculation, pure hype. It amazes me that this thing has a market cap of $ 7 billion and is making less than $ 1 million in sales this year. The valuation is absolutely crazy, ”Tepper told CNBC. “Trading Nation” Tuesday.

Virgin is expected to generate $ 966,000 in sales in fiscal 2020, according to FactSet. This revenue is expected to reach $ 28 million in fiscal 2021, when commercial flights are expected to begin. However, Tepper isn’t convinced that the customer base is as large as investors expect.

“The price for these flights is between $ 250,000 and $ 300,000 over there. My question is who can afford them?… What is the total addressable market? What I keep seeing from all the bulls, c is that they throw out anyone with a net worth of $ 5 million and over and there are 2.4 million of those people in the world.… I think TAM is really just people with a net worth of $ 10 million or more. So now the APR goes from 2.4 million people to 1 million. That changes everything, “Tepper said.

Todd Gordon, founder of TradingAnalysis.com, says the high price tag might be justified.

“I understand the valuation is astronomical, pun intended. But this market seems to give visionary CEOs very high valuations, and I think Virgin Galactic could also be boosted by [Tesla CEO Elon Musk’s] success with SpaceX, ”Gordon said during the same“ Trading Nation ”segment.

Gordon believes there is more to Virgin Galactic than space tourism, such as commerce and logistics, which he believes the high valuation is based on.

Virgin Galactic is not expected to generate annual profits until fiscal 2023. Analysts are forecasting a loss of $ 1.23 per share this year.

Disclosure: Gordon owns SPCE.

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