What do Virgin Orbit Holdings (NASDAQ:VORB) shares and the test flight on Monday have in common? Both are heading lower quickly. Virgin Orbit shares fell 20% when the market opened today, down to $1.50. This came after the LauncherOne rocket that was meant to launch nine satellites into space suffered problems with its secondary engine. Should I use this opportunity as a chance to buy the stock?
The quick run down
Virgin Orbit was spun out of Virgin Galactic back in 2021. It was merged into a special purpose acquisition vehicle (SPAC) when that type of company structure was very popular. Even though the hype around SPACs has died down somewhat, Virgin Orbit has been a publicly listed stock for the past year in this form.
The business has been operating commercially since 2021, and it notes that it “has already delivered commercial, civil, national security, and international satellites into orbit”. Most of this action has been in the US, but it has been focused on expanding the satellite launch capabilities to other countries.
Part of this was to capture the UK market, with the flight on Monday due to be a statement of intent. As part of the planning, Virgin Orbit aimed to convert Newquay airport into Spaceport Cornwall. Unfortunately, the issue in the flight meant that the news coverage has been largely negative. This is the short-term driver behind the fall in the share price.
A new sector to explore
If I take a step back, the share price picture looks even worse. The stock is down 86% over the past year. In the Q3 results presentation, it recorded an adjusted EBITDA loss of $42.9m. Even though it did take in revenue of $30.9m for the quarter, high expenses wiped out any potential to turn a profit.
This doesn’t surprise me, or even worry me massively. These type of growth stocks typically lose money consistently until the business reaches mass scale. Given the desire to expand in countries ranging from the UK to Australia, Virgin Orbit could break even years down the line.
However, my main worry comes from the fact that I don’t know enough about this area. I’m no expert in launching rockets into space. I don’t know how profitable this business could be, or how much of a market there is for the company.
Don’t get me wrong, I’m not an expert on every stock that I own. But I do have a good grasp on sectors ranging from high-street retailers to big banks. This allows me to make better and more informed investment decisions that are more likely to generate me a profit. I can’t say the same for Virgin Orbit.
Staying away from Virgin Orbit shares
With a share price that is down heavily in the past year, a failed UK flight and a sector that isn’t my strongest, I won’t be investing anytime soon.
The business could recover from the bad press and successfully launch in other countries in 2023. If it wins some big government contracts in coming years then it could break even. But ultimately I just don’t have the vision right now to see myself making a return.
The post Virgin Orbit shares dump 20% after failed flight. What should I do? appeared first on The Motley Fool UK.
Jon Smith has positions in Virgin Galactic. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2023