Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.
On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.
Stocks that trade at extremely high valuations are prone to move on news, since there are no true fundamentals available to estimate the equity's value.
It is even more difficult for companies that make no money or are still losing money. The above scenario applies to Virgin Galatic Holdings Inc SPCE, Monday's PreMarket Prep Stock of the Day.
'Sell The News' In July: Prior to the company’s test launch into space to test for consumer travel, the issue made a run at its all-time high that was made in February at $62.90.
From its June 21 close ($36.02), the issue rocketed to $57.91 over the next five sessions.
The highest close for that move came on June 25 at $55.91. With the actual launch not occurring until July 11, its share price became very turbulent over the following few days.
In the week just ahead of the launch, the issue put in a series of lows at the $43 area and traded up to the $53 area at week’s end, before closing at $49.20 on July 9. On the first trading day after the successful launch, the issue swooned to $40.69.
No Virgin Galactic Catalyst: With the event now behind the issue, it was greeted with more and more sellers.
Although it had intermittent rallies, the issue reached its lowest levels until it bottomed at $23.82.
It was able to distance itself from that low to close on Friday at $25.18.
'Bad' Virgin Galactic News: Before the open, it was announced that during preparation for the Unity 23 test flight, a third-party supplier recently flagged a potential manufacturing defect in a component of the flight control actuation system that they supply to Virgin Galactic.
It has yet to be determined whether the defect is present in the company's vehicles and if a fix is needed. Erring on the side of caution, and adhering to Virgin Galactic's established safety procedures, the company is in the process of conducting inspections in partnership with the vendor.
SPCE Price Action: With the issue hovering just above its low for the recent slide, the announcement instigated another move lower. The bad news is that after a lower open, it could not regain Friday’s closing ($25.15), only reaching $24.87, and then resumed its move lower.
The somewhat good news is the issue did breach the pair of lows at $23.82, reaching $23.58, but has rebounded back into the lower $24 handle.
Whether this is an undercut of the low and subsequent rally or a pause in the downside action is yet to be determined.
The stock ultimately ended Monday's session down 4.22% at $24.26.
Virgin Galactic Moving Forward: If the issue is unable to hold this support area, it will be entering an area of limited daily support. The reason being is there is a “gap” or void in price down from its May 21 high ($21.57). Interestingly, the much higher price action on May 24 was the result of the company’s successful spaceflight test over the prior weekend.
The discussion from Monday’s PreMarketPrep Plus Show on the issue can be found here:
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