Galactic Virgo (NYSE: SPCE) stocks were hammered this week, as investors sell off after the company’s latest successful flight into space. Even Richard Branson who was on the last mission was not enough to get investors excited about stocks. But there are some positives to be taken from a bad week for this growth stock.
While some observers may downplay the excitement of a few minutes weightless in space, there may be more willing ticket buyers than currently thought. UBS estimates that Virgin Galactic will increase ticket prices from $ 250,000 each to between $ 300,000 and $ 400,000, and thousands of buyers could line up. Here is an overview of the size of the potential market for these tickets.
Image source: Virgin Galactic.
A new adventure for the rich
The $ 300,000 ticket price might sound crazy to you and me, but there are a lot of people for whom it’s a drop in the bucket, and they’re already spending tens or hundreds of thousands of dollars on private jets. .
- The United States alone has 614 billionaires, according to Forbes.
- There are 20,600 people in the United States with a net worth of over $ 100 million, CEO World reports.
- There are 13,392 privately owned jets in North America, according to Statista. In California alone, there are 212,270 charter flights per year.
- The cost of private jet flights varies, but a flight on a mid-size jet can easily cost over $ 20,000, and the cost per flight hour for a large jet can be $ 78,000, according to Travel Magazine. . AWAY. In other words, a cross-border flight can cost about as much as a ticket to space with Virgin Galactic.
I am reporting these numbers because we already know that rich people spend a lot of money each year on travel. And a $ 300,000 bill to spend a few minutes in space isn’t going to break the bank, especially when it’s a number comparable to a private flight across the country.
To put the cost of a $ 300,000 ticket into perspective, for someone with a net worth of $ 100 million, the ticket would cost at most 0.3% of their net worth. For comparison, a person with a net worth of $ 83,333 would spend about the same percentage of their wealth spending $ 250 to go skydiving.
The astonishing thing is that Virgin Galactic’s early bookings weren’t limited to these very wealthy individuals. Seventy percent of preorders came from people with net worth less than $ 20 million. So, the company’s target market could be around 2 million people with a net worth over $ 10 million.
A $ 300,000 bill for most of us is an insane amount of money, but for the rich it is a drop in the bucket. And for a once in a lifetime experience, it might be worth it even for the “ordinary” rich.
Cost increases can be short-lived
In its presentation to investors in 2019, Virgin Galactic management hinted that it would end up drastically lowering ticket prices. During discussions of the total addressable market, he pointed out that around 50,000 people have a net worth of over $ 50 million and could reasonably afford a ticket price of $ 500,000, while 1.78 million people have a net worth of over $ 10 million and could pay $ 100,000 for a ticket. But management also pointed out that 5.07 million people had a net worth of over $ 5 million and could afford a $ 50,000 bill.
This was not a projection of future ticket prices, but as the volume of flights increases and the high capital cost of a spaceport and spacecraft can be spread over more than flights, ticket costs may drop significantly.
If ticket prices increase in the short term, it could indicate that there is more than enough demand at a higher price for a limited supply. But don’t be surprised if the costs eventually come down and tickets become available to millions of people around the world.
Opening of a new thrill ride
A few minutes in a weightless environment may seem like an unnecessary and unnecessary experience to some, but for the rich thrill-seekers it may be worth the price of admission. There is no shortage of yachts and private jets in the world, and they don’t even provide the unique thrill of being in space.
According to Virgin Galactic, less than 600 people have been to space yet, so it’s an experience that a limited number of people have had. Virgin Galactic could eventually send more than 600 people into space each year. And at first glance, there are a large number of people who might be willing to pay $ 300,000 for the privilege of taking this exclusive flight.
10 stocks we prefer over Virgin Galactic Holdings Inc
When our award-winning team of analysts have stock advice, it can pay off to listen. After all, the newsletter they’ve been running for over a decade, Motley Fool Equity Advisor, has tripled the market. *
They just revealed what they think are the top ten stocks investors can buy right now … and Virgin Galactic Holdings Inc was not one of them! That’s right – they think these 10 stocks are even better buys.
See the 10 actions
* The portfolio advisor returns on June 7, 2021
Travis Hoium owns shares of Virgin Galactic Holdings Inc. The Motley Fool owns and recommends shares of Virgin Galactic Holdings Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.