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Shares of Virgin Galactic (SPCE) are on the rise on Monday after the company completed its third spaceflight over the weekend. Following the news, Alembic Global analyst Peter Skibitski upgraded the stock to Overweight as he believes the successful flight could drive new share momentum and should keep Virgin Galactic's test schedule on track.

Successful Spaceflight

On Saturday, Virgin Galactic completed its third spaceflight and the first ever spaceflight from Spaceport America, New Mexico. The flight sees New Mexico become the third U.S. state to launch humans into space. VSS Unity achieved a speed of Mach 3 after being released from the mothership, VMS Eve, and reached space at an altitude of 55.45 miles before gliding smoothly to a runway landing at Spaceport America.

Alembic Global analyst Peter Skibitski upgraded Virgin Galactic to Overweight from Neutral with a price target of $25, up from $20, following the company's successful spaceflight, which he believes could drive new share momentum. Saturday's flight was "particularly important" because the prior test in December 2020 failed due to electromagnetic interference issues with the onboard computer, noted Skibitski, who believes the flight is likely to keep Virgin Galactic's test schedule on track.

The analyst acknowledged that he doesn't "seek to get too much more aggressive on valuation," given that there should be three test flights remaining before the first consumer revenue-generating flight is expected in early 2022.

Virgin Galactic, per normal procedures, now expects to conduct a review of all the test datapoints gathered, including physical inspections of the mothership and spaceship, Skibitski noted. Upon confirmation of the test results the company will proceed with the next flight test, which will involve two Virgin Galactic pilots and four Virgin Galactic personnel in the passenger cabin.

The test flight after that will be a marketing-related event involving Richard Branson, followed by a final test flight with the Italian Air Force late summer/early fall. The analyst noted there would then be a four-month gap to install spacecraft improvements before the first full-consumer spaceflight occurs, which he estimates to be in the first quarter of 2022 if all goes well.

Meanwhile, Bernstein analyst Douglas Harned raised the firm's price target on Virgin Galactic to $27 from $18, but kept a Market Perform rating on the shares. The analyst noted that he lowered his target price after first quarter earnings due to the delay in the flight test. But, with the test happening successfully and virtually on schedule, he is moving back to his prior outlook.

Even though there is significant upside to his target price based on the May 21 close, Harned expects much of that to be covered pre-market. Should that not happen, the stock could be materially more attractive, the analyst contends.

What's Notable

Virgin Galactic stock had been under pressure earlier this month after the company reported weaker than expected quarterly results and said its next spaceflight test could be delayed further due to an unexpected possible maintenance issue with carrier aircraft VMS Eve. Following the news, both Credit Suisse and Susquehanna lowered their price targets on the shares.

Michael Patrick Moses, President of Space Missions & Safety, explained:

"Our next maintenance cycle is planned for later this fall. And prior to Eve's last flight, all inspections confirmed our schedule was on track. However, following this last inspection, we identified an item on our maintenance calendar that needs further study to determine whether we need to take action now instead of the fall as planned.

"Because this issue just emerged at the end of last week, we are still determining what steps may be necessary to address it. While this may impact our flight test schedule, I want to emphasize that this is the nature of a test flight program and we are going to take the time we need before moving forward."

Price Action

In Monday morning trading, shares of Virgin Galactic have gained over 13% to $23.82. As of the time of publication, shares are trading at around $25.77.