Virgin Galactic Holdings Inc SPCE shares have taken a beating this week after founder Sir Richard Branson completed his journey to space over the weekend. The stock initially traded higher on Monday morning before Virgin announced a new $500 million share offering, which sent the stock into a tailwind this week.
Tilson’s Take: On Monday, former hedge fund manager Whitney Tilson said he’s a big supporter of Virgin and Branson, but that investors should be careful with Virgin stock.
“Even though SPCE shares were up earlier this morning in pre-market trading, there’s a high risk that this could be a huge ‘buy the rumor, sell the news’ situation,” Tilson wrote in his newsletter.
After trading above $52 on Monday morning, Virgin shares are now back below $34 after another 10.7% sell-off on Thursday. Unfortunately, Tilson said it may still be too early to be buying the dip.
“I think it's too early to bottom-fish – it will have to go below $20 before I get interested,” he said.
Timely Downgrade: Tilson isn’t the only person that believes Virgin is already pricing in a large amount of optimism.
In late June, Bank of America analyst Ronald Epstein double downgraded Virgin from Buy to Underperform. Following Branson’s successful flight, Epstein said this week that Virgin’s risk-reward balance is still unfavorable.
“We see the risk reward as more skewed to the downside given our probability weighted base, bull and bear cases. Further, we believe the current valuation more than reflects the underlying financial fundamentals and gives the company a more than healthy multiple premium for potential growth,” Epstein wrote in a note.
Benzinga’s Take: Both Tilson and Epstein were right that Virgin shares were overpriced prior to the Branson flight, but they seem to disagree on the price at which investors should be buying the dip. Epstein has a price target for Virgin of $41, while Tilson said he wouldn’t find the stock attractive until it hits $20.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.