Last week, when Virgin Galactic (SPCE) announced it would be replacing its CEO, the
company sent a clear signal that it will be moving from a novel spaceship
company to a company focused on making money.
The Sir Richard Branson-backed Virgin Galactic
is scheduled to launch its first paying passengers into space later this year,
and begin monetizing the technology that was born when Burt Ruritan, and his
company Scaled Composites, won the Ansari X Prize in 2004.
With the hiring of former Disney (DIS) executive Michael Colglazier, Virgin Galactic is
clearly pivoting from a technology development company to one with commercial
Speaking on the hiring of Mr. Colglazier,
former CEO, and now Chief Space Officer, George Whitesides, said: The next decade
for Virgin Galactic will be commercially-focused, and it is the perfect moment
for us to bring a visionary commercial leader like Michael to take the Company
The market applauded the move, with Virgin
Galactic stock moving higher, eventually breaking out of the trading range the stock
had been in since early April of this year.
As COVID-19 vaccines appear to be getting
closer and closer, we can begin to anticipate a day, likely sometime next year,
that well once again be looking for entertainment outside of the house.
I think you could do worse than picking up
some entertainment companies, like Virgin Galactic on the high end of the
entertainment spectrum, or Disney on the lower end.
As I said above, Virgin Galactic is still targeting its first commercial launch for
later this year, but with no exact date yet. Mr. Branson is scheduled to be on
that first flight as well.
The company is looking to monetize its
suborbital commercial tourism business, which it has been selling tickets at
$250,000 a pop. And that is why Mr. Colglazier, who most recently ran Disney
Parks International, has been brought into the fold.
I like both the addition of Mr. Colglazier and
the transferring of Mr. Whitesides to the space side of things. Whitesides will
work on the next phase of the company’s growth: point-to-point hypersonic
travel and orbital space travel.
Since the company has not yet begun commercial
operations, there is no appreciable revenue to speak of, other than some income
from engineering work. So, the play here is in trusting Mr. Branson, and the
fact that he will realize his many-years-long dream of getting to space.
Disney is in the process of trying to
reopen its parks, but is running into the issue of U.S. cities and states
reopening, and then reclosing. This puts the in-person park business on a slow,
but I believe upward, trajectory. The recent swing by President Trump to a
pro-mask stance may help here as well.
On the plus side, many professional sports are
opening back upmost notably, professional baseball had its opening day on the
23rd. This should help bring viewers back to Disneys ESPN media property.
The company has done a good job on the marketing
front by getting the NBA to have its entire league live in a bubble at Walt
Disney World in Orlando. Teams currently plan to live and play at the park for
the rest of their season.
In its latest quarter, Disney reported revenue
down 93% year-over-year, which was not surprising given the pandemic. Earnings
per share came in at $1.44, down from $5.42 year-over-year.
Finally, lets talk about an entertainment
company that just reported earnings, and does not need to wait for a reopening.
Snap (SNAP), which just reported earnings, has traded lower because the
company missed high expectations for increasing users. Its not surprising to
see the stock take a breather, as its up from $8 at the March market lows, to
over $26 before earnings.
Snapchat has been capturing market share of
the all-important eyeballs market, as our entertainment options have been
curtailed during the pandemic. The company reported revenue increased 17%
year-over-year to $454 million.
Daily average users also grew by 17%, with the company picking up 35 million additional users year-over-year. With a number slightly disappointing to the Street, this may be a good place to enter the stock on the pullback.
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