Virgin Galactic Holdings, Inc. (SPCE) is an integrated aerospace company that specializes in commercial space travel. Founded in 2017, the company went public through a reverse merger with Social Capital Hedosophia in October 2019, making it the world’s first publicly traded commercial human spaceflight company. In comparison, Micron Technology, Inc. (MU) is a semiconductor systems manufacturer with a focus on memory and storage products. It operates through four segments—its Compute and Networking Business Unit, Mobile Business Unit, Storage Business Unit, and Embedded Business Unit.
SPCE and MU have been on retail investors’ radars for some time and are frequently discussed on Reddit chat room r/wallstreetbets. SPCE has been the fourth most-mentioned stock in the forum over the past 24 hours. MU was in the top 10 most frequently discussed stocks in the forum as of July 2. With meme stocks gearing up to make a strong comeback following the Gamestop, Inc. (GME) short squeeze earlier this year, both stocks are poised to soar in the coming months.
SPCE has gained 176.6% over the past year, while MU has returned 61.2% over that period. In terms of year-to-date performance, SPCE is the clear winner with 89.4% gains versus MU’s 6.9% returns. Shares of SPCE have gained 44.4% over the past month, while MU’s shares have declined 4.8%.
But which stock is a better buy now? Let’s find out.
SPCE is currently named in several class action lawsuits filed by multiple law firms alleging violations of the federal securities laws and making materially false and misleading statements. The lawsuits claim that SPCE failed to disclose that its warrants issued during the time of a reverse merger were required to be treated as liabilities rather than equities, for accounting purposes. Also, SPCE allegedly failed to maintain appropriate controls over its financial reporting.
SPCE is currently scheduled to test fly its SpaceShipTwo Unity on July 11, following weather and technical checks. Such routine test flights make SPCE a leading player in the space travel industry.
On July 1, MU entered a definitive agreement to sell its Utah fab manufacturing facility for approximately $1.50 billion. The company plans to focus on its core products and pursue new memory solutions for data centers, using the proceeds from this sale.
In June, MU launched its memory and storage innovations across its portfolio as well as industry-first universal flash storage solutions for automotive applications. Such portfolio additions are aligned with the company’s aim to deliver accelerating data-driven insights through innovations in the era of 5G and artificial intelligence.
Recent Financial Results
SPCE generated zero revenue in its fiscal first quarter, ended March 31. Its operating loss increased 33.3% from the same period last year to $81.28 million, while its interest income declined 72.8% from the prior-year quarter to $318,000. Its net loss and loss per share came in at $129.69 million and $0.55, respectively.
MU’s revenues increased 36.5% year-over-year to $7.42 billion in the fiscal third quarter ended June 3, 2021. Its gross margin and operating income increased 77.3% and 102.6% year-over-year to $3.13 billion and $1.80 billion, respectively. Its net income came in at $1.74 billion, up 115.5% from the year-ago value. Its EPS stood at $1.52, indicating a 114.1% rise from the same period last year.
Expected Financial Performance
Analysts expect SPCE’s revenues and EPS to decline 56.8% and 10%, respectively, year-over-year in the about-to-be-reported quarter, ended June 30, 2021. The company’s revenues are expected to rise 1,173.1% in 2021, and 1723.1% in 2022. However, SPCE’s EPS is expected to decline 12.8% in the current year, and at a rate of 60.6% per annum over the next five years. Moreover, analysts expect the company’s EPS to remain negative until at least 2022.
The Street expects MU’s revenues to rise 35.3% in the current quarter (ending August 2021), 29% in the current year, and 33.2% next year. The company’s EPS is projected to rise 113.9% in the current quarter, 109.9% in fiscal 2021, and 93.8% in 2022.
Furthermore, MU has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters, while SPCE missed in three.
MU’s trailing-12-month revenues came in at $25.49 billion. SPCE, in contrast, has yet to generate revenues from its operations. SPCE’s trailing-12-month negative net income margin compares with MU’s 16.2%.
SPCE’s ROE, ROA and ROTC are negative, while MU’s ROE, ROA and ROTC margins stand at 10.3%, 5.79% and 6.59%, respectively.
Thus, MU is the more profitable stock here.
In terms of forward EV/Sales, SPCE is currently trading at 3,526.17x, significantly higher than MU, which is currently trading at 3.19x. SPCE’s trailing-12-month Price/Book ratio of 25.40 is 1,092.5% higher than MU’s 2.13.
Also, SPCE’s forward Price-to-Earnings ratio is negative, while MU is currently trading at 13.46 times its forward earnings estimate.
Thus, MU is the affordable stock here.
SPCE has an overall rating of F, which equates to Strong Sell in our POWR Ratings system. MU, on the other hand, has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.
SPCE has an F grade for Value, and D for Quality. The company’s negative forward Price/Earnings ratio justify the Value grade, while its negative ROE and return on sales are in sync with the Quality grade.
MU, in comparison, has a B grade for Value and Quality. The stock’s 13.46 non-GAAP forward P/E multiple is 50.4% lower than the 27.13 industry average, which is consistent with the Value grade. Moreover, MU’s trailing-12-month ROE and net income margin of 10.31% and 16.2%, respectively, are significantly higher than the industry averages of 6.86% and 4.86%, respectively, consistent with the Quality grade.
Of the 29 stocks in the F-rated Airlines industry, SPCE is ranked at last. MU, on the other hand, is ranked #22 of 99 stocks in the B-rated Semiconductor & Wireless Chip industry.
Click here to checkout our Semiconductor Industry Report for 2021
Beyond what we’ve stated above, we have also rated SPCE and MU for Growth, Momentum, Stability, and Sentiment. Click here to view all SPCE ratings. Get all MU ratings here.
SPCE is known as the first and only publicly traded commercial space travel company. However, it is still in the testing phase and has yet to achieve commercial success. MU, on the other hand, is an established player in the semiconductor space. Moreover, the company has managed to report impressive financials in its most recent quarter, regardless of the current chip shortage. This, coupled with MU’s discounted valuation and higher profitability, makes it the better investment bet here.
Our research shows that odds of success increase when one bets on stocks with an overall rating of Strong Buy or Buy. Click here to view the top-rated stocks in the Airlines industry. View the top-rated stocks in the Semiconductor & Wireless Chip industry here.
SPCE shares were trading at $46.27 per share on Tuesday afternoon, up $1.33 (+2.96%). Year-to-date, SPCE has gained 94.99%, versus a 16.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don’ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More…