The Wrong Stuff
How ironic is it that Virgin Galactic (NYSE: SPCE) has the word “galactic” right there in its name … and yet, it can barely get to space?
This weekend, it didn’t even do that. Virgin cut short a December 12 test flight after complications with SpaceShipTwo’s onboard computers. It was the company’s first test flight in 22 months.
Where’s Mr. Sulu when you need him?
In a statement, Virgin Galactic CEO Michael Colglazier said:
The flight did not reach space as we had been planning. After being released from its mothership, the spaceship’s onboard computer that monitors the rocket motor lost connection. As designed, this triggered a fail-safe scenario that intentionally halted ignition of the rocket motor. Following this occurrence, our pilots flew back to Spaceport America and landed gracefully as usual.
The company is hailing the failed mission as a successful test of Virgin’s fail-safe procedures. That said, the remaining test schedule is now up in the air, so to speak.
Virgin Galactic has two additional spaceflight tests on the docket. One with a NASA payload and another with founder Sir Richard Branson, previously scheduled for the first quarter of 2021.
Virgin can hype up the safety measures all it wants. And that’s good. However, this weekend’s failed test was akin to putting airbags on a NASCAR stock car and having them go off before leaving pit row. Sure, they work, but you’re not going to see that checkered flag anytime soon.
Wall Street knows the real deal and sent SPCE shares free falling some 15% on the open this morning. Despite the drop, SPCE is still up a whopping 148% so far this year.
Unfortunately for investors, Virgin Galactic is the only pure-play stock for space tourism. Virgin’s biggest competitor in the space space is Elon Musk’s SpaceX. SpaceX remains privately held, with no indication that it will go public anytime soon.
For the time being, I remain skeptical of Virgin Galactic. The company appears promising, and first-mover status in the space tourism market could be a major advantage. Furthermore, there is a serious technology and regulation moat around Virgin Galactic’s business model.
However, I am unconvinced that space tourism will be profitable any time soon. Yes, I know that things like “profitability” and “valuation” all but died this year. But they still mean something to me, gosh darn it.
If you really must invest in space tourism and Virgin Galactic now, remember that the shares will be rocketing all over the place for some time. If you can ride out the volatility, you may eventually be rewarded.
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The Good: Pfizer Pvaccine Pfinalized
It’s official! Late on Friday, the U.S. Food and Drug Administration (FDA) approved emergency use authorization of Pfizer’s (NYSE: PFE) COVID-19 vaccine.
Pfizer says it will deliver 25 million doses across the country before the end of 2020, with roughly 2.9 million doses distributed this week.
As you may remember, Pfizer’s vaccine needs to be kept extremely cold. We’re talking -70 degrees Celsius. That’s -94 degrees Fahrenheit for us regular Americans, which is cold enough to make the mountains on a Coor’s Light cold-activated can explode.
Because of this, Pfizer’s vaccine shipments will be packed in dry ice and equipped with GPS and temperature sensors to ensure the doses arrive safe and stable.
For investors, the news prompted a round of profit-taking. PFE shares fell nearly 2.5% today.
Despite all the hype surrounding Pfizer’s vaccine, the stock is only up about 9.2% year to date. Investors are likely concerned that the (at least) three other COVID-19 vaccine candidates up for approval next month will limit profits.
The leading contender is Moderna’s (Nasdaq: MRNA) vaccine, which does not need special temperatures for storage or shipment. The FDA will review Moderna’s vaccine for emergency authorization this Thursday.
The Bad: Oops, Something Went Wrong
We’ve all heard of snow days. Heck, some of us lived for snow days back in grade school. (Don’t judge me.)
But have you ever heard of “Google days?” I received a phone call from my daughter’s principal this morning warning of an hour delay … because Google was down.
These are truly bizarre times we live in.
The issue, first noticed by millions of at-home users late-night browsing, occurred when Alphabet’s (Nasdaq: GOOG) YouTube went down.
Those trying to access YouTube received a simple screen reading: “Oops. Something went wrong.”
Wrong indeed. It wasn’t just YouTube, but all of Google’s services: Gmail, Google Drive, Google Meet and Google Classroom — hence the 5:30 a.m. call about a delayed school start. Curse you, Google!
Google services weren’t down for long, with most up and running before the market opened this morning. However, this wasn’t the first service outage Google has experienced this year. A massive outage hit the company in August — when schools returned from summer break — and again last month.
While the outage was clearly bad optics for Google, investors largely shrugged off the news. GOOG shares finished today essentially flat.
No harm, no foul, right?
The Ugly: Canned Air
Are you ready for more Airbnb (Nasdaq: ABNB)? Too bad, because this is the story that just won’t quit.
Last week, ABNB shares skyrocketed from an IPO price of $68 to about $149 — making it the 19th stock this year to double on IPO day. A rather auspicious achievement, indeed.
Now, rocketing 119% in one day certainly made investors happy. But analysts, not so much … especially Gordon Haskett Analyst Robert Mollins.
Mollins double-downgraded ABNB from buy to underperform — essentially a soft sell recommendation. He also set his price target at $103, a 26% downside from Friday’s close.
Why would Mollins do such a thing? Is he just an IPO killjoy? Does he read too much Great Stuff?
According to Mollins, “Investors that we’ve spoken with like Airbnb’s business model and want to be long-term holders, but are now looking at selling the stock because they no longer feel comfortable owning it trading at a 300-400% valuation premium.”
I’ve raised the valuation question several times since Airbnb announced its IPO pricing. Don’t get me wrong; I like the company. It has potential.
But we’re in a pandemic, and this valuation seems crazy to me. Apparently, I’m not the only one. If Mollins is right, ABNB could be in for a round of massive profit-taking some time soon — and I’m not talking about today’s piddly 9% decline either.
But, there I go talking about “valuation” again. Old habits die hard, I guess.
Great Stuff: The Death of Valuation?
What do you think, Great Ones?
Is this year’s crop of IPOs and SPACs overvalued?
Is valuation even something you consider anymore when investing?
Or is everyone just trading options and YOLO’ing all day?
Drop me your rant at GreatStuffToday@BanyanHill.com.
Speaking of options … there’s never been a better time to play both sides of the volatility pendulum … however, it swings each day. And if you’re new to options, a simple trading system is key.
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We’ll be back tomorrow, so check us out on social media for now: Facebook, Instagram and Twitter.
Until next time, stay Great!
Editor, Great Stuff