Space company Virgin Orbit Holdings, Inc.’s (VORB) stock is sliding drastically after the company’s recent filing for Chapter 11 bankruptcy protection. The satellite launching business struggled to secure a funding lifeline following a failed launch in January. With this news came heavy trading of SI, and most shareholders unloaded the stock.
Following the lead, investors should sell this risky stock now because of its weak fundamentals and gloomy outlook.
Satellite space startup VORB has been in a tough spot lately. On April 4, the company filed for Chapter 11 bankruptcy protection after it failed to secure long-term funding. The announcement came in less than two years after VORB went public at a valuation of approximately $3 billion.
“While we have taken great efforts to address our financial position and secure additional financing, we ultimately must do what is best for the business,” VORB’s Chief Executive Dan Hart said in a statement last Tuesday.
“We believe that the cutting-edge launch technology that this team has created will have wide appeal to buyers as we continue in the process to sell the Company. At this stage, we believe that the Chapter 11 process represents the best path forward to identify and finalize an efficient and value-maximizing sale,” Hart added.
The space company’s sixth mission in January using its centerpiece LauncherOne rocket, the first rocket launch out of the United Kingdom, failed to reach orbit, sending its payload of commercial and defense-related research satellites plunging into the ocean.
The last mission’s mishap forced the company to cease operations for the foreseeable future after failing to secure a funding lifeline and lay off nearly 85% of its workforce. According to a Securities and Exchange Commission (SEC) filing, VORB said that the layoffs constituted 675 positions, and the company expects to take related charges of about $15 million.
VORB is trading at a significantly high volume, with most shareholders unloading the stock following the bankruptcy news. Approximately 127,160,322 shares were traded on the previous trading day compared to the average volume of about 9,440,000 shares.
Shares of VORB have slumped 84.3% over the past month and $93.3% over the past six months to close the last trading session at $0.20. Also, the stock has declined more than 97% over the past year. VORB is currently trading 97.1% below its 52-week high of $6.79, which it hit on April 12, 2022.
Here are the factors that could affect VORB’s performance in the upcoming months:
Poor Financials
For the third quarter that ended September 30, 2022, VORB’s gross loss narrowed 9.1% year-over-year to $9.49 million. Its operating loss widened by 12.5% from the year-ago value to $50.50 million. The company’s net loss worsened by 13.1% year-over-year to $43.64 million, while its net loss per share stood at $0.13.
As of September 30, 2022, the company’s total assets came in at $242.98 million, compared to $331.74 million as of December 31, 2021. Its total liabilities were $153.49, compared to $118.77 million as of December 31, 2021.
Stretched Valuation
In terms of trailing 12-month Price/Sales, VORB is currently trading at 1.99x, 59.7% higher than the industry average of 1.25x. Likewise, the stock’s trailing 12-month EV/Sales multiple of 1.67 is 2.4% higher than the industry average of 1.63.
Poor Profitability
VORB’s trailing 12-month gross profit margin of negative 112.33% compares to the industry average of 29.70%. And the stock’s trailing 12-month asset turnover ratio of 0.17x is 79.3% lower than the 0.80x industry average.
Additionally, the stock’s trailing 12-month ROCE, ROTC, and ROTA of negative 285.43%, 106.67%, and 74.59% are significantly lower than the industry averages of 13.83%, 7.02%, and 5.20%, respectively.
POWR Ratings Reflect Bleak Prospects
VORB has an overall F rating, translating to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. VORB has an F grade for Quality, in sync with its poor profitability relative to its peers.
In addition, the stock has a grade D for Growth and Sentiment, consistent with underwhelming performance in its last reported quarter and unfavorable analyst estimates.
VORB is ranked #66 of 73 stocks in the Air/Defense Services industry.
Beyond what I have stated above, we have also given VORB grades for Stability, Value, and Momentum. Get all VORB ratings here.
Bottom Line
VORB has struggled significantly over the past few months amid mounting losses, increasing debt, declining market share, and a failed mission. The company sought funding from a lender to keep its business going. However, it could not secure the financing required to continue its operations unhindered.
Following this, VORB filed for Chapter 11 bankruptcy protection last Tuesday and is looking to sell its assets. This announcement came with heavy trading of the stock. Therefore, we think this high-volume stock could be best avoided now.
Stocks to Consider Instead of Virgin Orbit Holdings, Inc. (VORB)
The odds of VORB outperforming in the weeks and months ahead are significantly compromised. However, there are many industry peers with impressive POWR Ratings. So, consider these three stocks rated A (Strong Buy) or B (Buy) from the Air/Defense Services industry instead:
BAE Systems PLC (BAESY)
Moog Inc. (MOG.A)
General Dynamics Corporation (GD)
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VORB shares were trading at $0.17 per share on Monday afternoon, down $0.03 (-16.86%). Year-to-date, VORB has declined -90.81%, versus a 7.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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