(Bloomberg) -- Shares of Virgin Galactic Holdings Inc. fell as much as 24% in early Thursday trading, the most ever, after downgrades from the two top analysts among the three that cover the stock, Morgan Stanley's Adam Jonas and Credit Suisse's Robert Spingarn. Both lowered their recommendations to the equivalent of neutral from buy.
Richard Branson's space transport company has been popular among hedge funds and other investors who believe it will establish a new space-tourism industry. Shares had soared about 150% so far this year, even with a post-earnings dip earlier this week.
Morgan Stanley's Jonas said he was “waiting for fundamentals to catch up.” He cut his rating to equal-weight, though he lifted his target to $30 from $22.
“Management's mission to be a sustainable and highly successful/profitable commercial space-line will require a confluence of events to come together over many years and in a potentially (if not likely) a non-linear manner,” Jonas wrote in a note.
While the company's story is still “compelling,” Credit Suisse's Robert Spingarn cut his rating to neutral on valuation, as he can no longer recommend the shares after this year's rally. He also raised his price target, to $25 from $15.
He added that with executives seeming to hedge the commercial service timeline during their conference call, he now assumes service begins in the fourth quarter versus a prior expectation of the third quarter. He also sees higher operating expenses.
Even so, Spingarn flagged Virgin Galactic's “near-term catalysts toward first revenue flight, its leading market position, strong incremental margin potential, and the scarcity value of the investment opportunity.”
Earlier this week, Virgin Galactic said it was preparing to resume ticket sales for future space flights, and would begin taking $1,000 refundable deposits Feb. 26. Shares fell after the company disclosed its fourth-quarter financial results, which included a net loss of $72.8 million and a 59% drop in sales to $529,000.
Read more: Feb. 25, Virgin Galactic Resumes Taking Deposits for Future Space Trips
To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net
To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm
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