Virgin Galactic (NYSE:SPCE) shares are currently trading just above $19. It’s still someway off the lows of the year, seen back in the middle of May around $15. Yet at the same time, it’s a long way off the dizzy closing highs of almost $60 seen back in February. The stock is known for being volatile, but is currently in the doldrums, waiting for a catalyst. We think the next move could be higher, and here’s why.

Good results bode well

The latest results were released on Monday, for the third quarter. The business said that “demand for space travel is strong, and we’ve been selling seats ahead of the pace we had planned. This demonstrates the incredible market for our product and appreciation for the value of the unique experience we offer.”

Seats don’t come cheap, being priced at a whopping $450,000 each. Yet of the 1,000 reservations that it has made available, over 700 have been taken. This comes ahead of what should be a pivotal 2022 in which flights should become a lot closer to reality.

The progress on ticket sales is good for several reasons. Firstly, it helps to gauge customer sentiment on the commercial viability of space travel. Secondly, it helps to get some much needed revenue through the door. In fact, Q3 finally showed some revenue for Virgin Galactic. It might have only been  $2.5m, but versus $0 from the same period last year, it’s a marked improvement.

Personally, it doesn’t look like Virgin Galactic shares are pricing in much optimism on this revenue or what it means going forward. At $19, we see good upside as investors start to place a premium on the outlook.

Competition not always a bad thing

Clearly, Virgin Galactic shares are a risky one to own. Due to the lack of financials in the past, the stock has traded heavily on speculation. This was seen back in the summer, when a successful test flight grabbed the headlines. The move to have this flight ahead of rivals Blue Origin and SpaceX was a smart marketing move from Branson and Co.

Yet this share price move faltered, with Virgin Galactic shares down some 65% since June. You could argue that the rivals are ahead of it, with deeper embedded ties. For example, the links between NASA and SpaceX.

This is valid, but it’s important to remember that this is a pioneering industry. The first mover advantage is key, but if space travel becomes genuinely commercialized in years to come, there is going to be plenty of room for several players. From that angle, healthy competition at this stage should be seen as a positive. It helps to push Virgin Galactic to work harder. In turn, this should help the shares to gain traction.

We like Virgin Galactic and think it’s a strong buy at $19. We take positive from the quarterly results this week, particularly the seat sales and outlook for 2022. 

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