Shares of Virgin Galactic surged higher in Tuesday trading but some of the positive momentum appears to be a case of mistaken identity.
Virgin Galactic’s stock has been a favorite among speculative traders, especially in the final few months of the bull market earlier this year. It’s also been prone to volatile swings and, on Tuesday, it rose alongside other technology stocks. But Virgin Galactic shares jumped even higher in midday trading, after a headline noted that similarly-named Virgin Orbit had won a government contract.
Space tourism venture Virgin Galactic does not have any ownership or stake in Virgin Orbit, a company that is developing rockets to launch small satellites. Additionally, while Virgin Galactic is publicly-traded, Virgin Orbit was spun-off in 2017 and is privately held by Sir Richard Branson’s multinational conglomerate Virgin Group.
Virgin Orbit on Friday announced that the U.S. Space Force selected the company’s wholly-owned subsidiary VOX Space to launch three missions worth a total $35 million. Virgin Galactic will not see a material benefit from Virgin Orbit’s Space Force contract as it is a separate company.
The only significant updates Virgin Galactic has made in the past two weeks have been related to its coronavirus relief efforts, such as the COVID-19 task force it helped put together in California to produce things like medical oxygen hoods.
Virgin Galactic shares rose 23.1% — its third best day of trading since its market debut last October — to close at $19.03.
Morgan Stanley analyst Adam Jonas noted Virgin Galactic’s stock surge on Tuesday, saying “we struggle to find additional new catalysts that have been driving the stock.” Jonas said he spoke to some Virgin Galactic shareholders and that there may be “bigger forces at work.”
“We can’t help but notice the wave of buying activity lifting the names in our coverage attached with long-term secular growth stories, such as Tesla and Carvana, which have also roughly doubled in the past 3 or 4 weeks. One client observed there are fewer assets investors can buy with growth attached to it in a post-COVID-19 world that may suffer from lasting impairment of more cyclical drivers,” Jonas said.