Morgan Stanley Bullish On Virgin Galactic, Says Space Tourism Is Incubator For Hypersonic Travel

Morgan Stanley started coverage of Virgin Galactic Holdings Inc SPCE on Monday with a bullish stance, saying the company's space tourism efforts are an oven for cooking up the development of hypersonic travel.

Virgin Galactic shares were blasting off Monday morning, gaining more than 10%. 

The Analyst

Adam Jonas initiated coverage of Virgin Galactic with an Overweight rating and $22 price target.

Jonas: Virgin Galactic Resembles A Biotech

The space tourism stock is like a biotech in terms of risk-reward, with the business of selling space adventure travel acting as a funding strategy for developing more important hypersonic travel, Jonas said in the Monday initiation note. (See his track record here.) 

Virgin Galactic's first commercial space flight for tourists is targeted for late next year, the analyst said, adding that he estimates the company could be taking 3,000 people into space by the end the next decade.

A Play On Future Hypersonic Flights

The space tourism business is only the prelude — a means to raise some cash to get the real business going, Jonas said.

The space tourism part of the business is worth no more than $10 a share, he said. 

What's really exciting is the later phase of the business, which involves hypersonic point-to-point travel, the analyst said. 

The "chance to disrupt the multitrillion-dollar airline total addressable market is what is really likely to drive the upside," Jonas said. 

Morgan Stanley forecast $800 billion in annual sales from that opportunity by 2040, and the billions in investment for building and launching spaceships will pay off by putting Virgin Galactic in a good place to take a big part of the sector, the firm said. 

Virgin Galactic Price Action

Virgin Galactic shares were rocketing on Monday, trading 12.52% higher at $8.18 at the time of publication. 

Related Links:

Musk Vs. Bezos Vs. Branson: Who's Winning The Space Tourism Race?

Space Travel One Step Closer To Reality As Richard Branson's Virgin Galactic Files To Go Public

Photo courtesy of Virgin Galactic.