SPCE Comes Back to Earth on Q1 Losses, Test Flight Update

Options traders are chiming in at three times the typical volume

Deputy Editor
May 11, 2021 at 10:27 AM
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Space exploration name Virgin Galactic Holding Inc (NYSE:SPCE) is plummeting this morning, last seen down 11.6% at $15.86, following the company's first-quarter earnings report. Digging deeper, Virgin Galactic announced worse-than-expected losses, as well as zero revenue. Additionally, founder Richard Branson said the company is evaluating the timeline for its next test flight, as the wear-and-tear on its Eve ship needs to be further analyzed.

Virgin Galactic stock has been working its way lower on the charts since March. Today's negative price action marks two consecutive days of trading under the $18 level, which hasn't happened for the equity since early November. Once a trendline that guided the shares to a Feb. 4 record of $62.80, the 10-day moving average is now keeping a tight lid on SPCE. Year-to-date, the stock is down 29.2%.

In response, at least one analyst chimed in with a bear note. Specifically, Credit Suisse cut the security's price target to $33 from $42.. Coming into today, most brokerages in coverage were hesitant, with four of seven calling SPCE a tepid "hold." The 12-month consensus price target of $37.20, however, stands at a staggering 123.4% premium to current levels, leaving the door wide open for additional price-target cuts going forward.

Short sellers have been building their positions lately -- short interest rose 18.1% in the two most recent reporting periods. These bears are still in control, too, given the 25 million shares sold short account for a hefty 15.5% of the stock's available float.

Drilling down to today's options activity, 34,000 calls and 23,000 puts have exchanged hands so far, which is three times the intraday average. Most popular is the weekly 5/14 18-strike put, followed by the 18-strike call in the same series, with new positions being opened at both.


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