Virgin Orbit Holdings Inc (NASDAQ:VORB) remained on the ‘Buy’ list at Canaccord Genuity but analyst halved their price target after its historic first attempt to launch satellites from British soil reached space on January 9, but ultimately fell short of reaching its target orbit.
In a note, the broker said the rocket experienced a flight anomaly after entering space. The second-stage mishap, which occurred mid-engine burn at a speed of 11,000 Mph, resulted in its customer satellite payloads not being placed into their planned orbital slots.
“VORB’s engineering team will now have to examine the flight data to conduct a root-cause analysis before resuming launch operations from the Cosmic Girl mothership,” the Canaccord analysts wrote. “In our model for 2023, we now expect that the anomaly investigation could delay a return to flight until 3Q/23, based on the experiences of SpaceX, Rocket Lab, Astra and other launch providers and the LauncherOne vehicle’s stage of development.”
READ: Virgin Orbit tumbles to earth after rocket fails to reach orbit following historic UK launch
The analysts noted that the LauncherOne/Cosmic Girl launch system is relatively mature, having conducted four successful consecutive launches before this launch failure without issue.
“As such, our assumptions on when LauncherOne may be able to resume flight with another rocket from the Long Beach factory at either Mojave or Cornwall may be conservative,” they added.
The analysts said the reduction in their price target for Virgin Orbit’s stock, to $6 from $12, reflects revised expectations for the pace of the Launch/Space Solutions ramp and a decline in sector valuations. The $6 target is calculated using a 1.8 times enterprise value/revenue (EV/R) multiple applied to their 2025 estimate.
They now expect 2023 revenues of $120 million, which includes six LauncherOne missions during the year occurring in the second half.
Technical fixes needed
While a slowdown in Virgin Orbit’s launch cadence may not impact build rates at its facility in Long Beach, California, they said it may require technical fixes to be applied to manufactured rockets in inventory after determining the root cause of this week’s anomaly.
The analysts said it is important to note that both SpaceX and Rocket Lab experienced multiple launch failures, but after conducting enough flights, spacecraft/flight engineers can work through most of the kinks that can arise with a particular system.
“This results in highly reliable systems like Falcon 9, Electron and Atlas V over time,” they added. “We believe that VORB is approaching this level of competency with LauncherOne, and the single-engine-per-stage simplicity of the vehicle makes it significantly easier to determine the source of a malfunction than more complex vehicles.”
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