The stock market is down today thanks to another bout of economic-fueled volatility. Rates ticked higher this week. Meanwhile, more discussion from the Federal Reserve brought uncertainty about the potential for a recession. Many presume to trust the Fed but its previous ‘transitory’ stance on inflation suggests that they aren’t infallible.
Much of what is desired is a directive that won’t result in a repeat of the financial crisis. Inflationary concerns aren’t entirely due to normal market metrics. We’ve seen rising virus cases, higher energy prices due to global conflict, and continued supply chain disruptions. With multiple headwinds, selling pressure has taken the stock market down lower, and plenty of leading companies with it. Many of these companies have gone into penny stock territory or are very close to it.
What Are Penny Stocks?
The basic definition for “penny stocks” refers to stocks under $5. In general, traders assume that all penny stocks are no-name, OTC companies that are just getting started. Believe it or not, that is the furthest from the truth. There are plenty of penny stocks on the NASDAQ and NYSE. Many of these companies are also recognizable names you’ve likely encountered this week.
We put together an article: 10 Top Penny Stocks To Buy Under $5 That Are Household Names and discussed high-profile companies trading as penny stocks. Does this mean they’re set to fail? Can they recover? Of course, there’s a chance of bouncing back. But when it’s a matter of higher-priced companies becoming penny stocks, there’s likely a sizeable fundamental shortfall that the market has reacted to. One example of this is Nio Inc. (NYSE: NIO). We wrote about the popular EV penny stock as it was beaten down after hitting a wall of bearish catalysts. But as you’ll see right now, NIO stock is far from the $5 threshold, having recovered since that drop.
Will SPCE Stock Join The List Of Penny Stocks In 2022?
This year has already seen several high-profile companies become penny stocks. Many of these are in the tech sector. For traders looking at Virgin Galactic (NYSE: SPCE), some are raising the question: Will SPCE stock become a penny stock this year?
One of the biggest reasons for this is the overall performance of SPCE stock. Despite an early bull trend from its public debut, the intergalactic travel stock has done nothing close to “going to the moon” this year. In fact, this week, shares of SPCE stock hit new all-time lows of $6.35 and just $1.35 shy of the penny stock threshold. Since hitting its all-time high last year of $57.51, the Virgin Galactic stock price has plummeted 88.9%.
Aside from underperforming shareholder expectations, there’s also a lawsuit naming Richard Branson and Chamath Palihapitiya. The suit alleges that insiders, including the two names prior, sold stock in Virgin Galactic despite being aware that some of Virgin’s ships had durability issues previously not disclosed.
Meanwhile, the company’s latest earnings have left much to be desired based on the market reaction on May 6h. One of the most significant sticking points for investors was Virgin’s postponement of commercial flights. In particular, Michael Colglazier, Chief Executive Officer of Virgin Galactic, said, “Against a backdrop of escalating supply chain and labor constraints, our teams are containing the majority of these issues to minimize impact on schedules. We look forward to returning to space in the fourth quarter and launching commercial service in the first quarter of next year.”
SPCE Stock Forecast
With this backdrop of uncertainty and more concern from shareholders regarding insiders, the SPCE stock forecast is mixed. But does that mean it’s slated to join the list of penny stocks in 2022? Here’s what analysts expect:
- Canaccord Genuity SPCE Stock Forecast: Hold rating downgraded from Buy, Price Target Cut from $36 to $8
- Morgan Stanley SPCE Stock Forecast: Underweight rating, Price Target Cut From $16 to $10
- Truist Securities SPCE Stock Forecast: Buy rating, Price Target Cut From $32 to $24
- Susquehanna SPCE Stock Forecast: Neutral rating, Price Target Cut From $22 to $9
Canaccord’s recent update came this week with a warning: “While the company remains very well-capitalized and has a manageable burn rate that will progressively advance in the coming quarters, we believe that investors need stronger visibility into the completion of the Spaceship/Mothership upgrades before getting bullish on the stock again.”
Should You Buy SPCE Stock?
So is SPCE stock a buy right now? Is this a “discounted” price, or has the market reevaluated things and decided that Virgin might not be set for “the moon” just yet? Given the current conditions in the stock market today, bears are clearly in control. The crash in the NASDAQ has sent a tidal wave of selling in some of the most popular stocks and penny stocks. Meanwhile, such an emerging industry like space tourism still has many unknowns.
Meanwhile, you have to remember that Virgin went public via a Special Purpose Acquisition Company (SPAC). While SPACs seemed to have their hay day early on, the longer-term trends in the market reflect a much more concerning trend. Among many SPAC merger stocks, a vast majority are far off their highs, and many, like SPCE, are trading significantly lower this year.
But will SPCE become a penny stock in 2022? Looking at the forecast, no single analyst has pegged the stock in the sub-$5 territory. As Canaccord’s analyst suggested, however, milestones still need to be reached before a bullish stance can be taken on SPCE stock. If this is on your watch list right now, leave a comment about your outlook for the company and if you think it will become a penny stock or not in 2022.