While the pandemic period has been challenging for the airline industry, it has been recovering over the past year. However, the industry still faces disruptions owing to a lack of human resources and the macroeconomic issues.
Therefore, I believe fundamentally weak airline stocks Virgin Galactic Holdings, Inc. (SPCE) and Astra Space, Inc. (ASTR) might be best avoided.
The issue of labor shortage and unsettled disputes between employees and business owners are significant obstacles to the expansion of this industry.
The Official Airline Guide (OAG) reported that pilot shortages would cause significant issues to the aviation sector. This issue will impact airline expansion and travel pricing, with projections of a global pilot shortage of 55,000 by 2029 across the EU, the Middle East, North America, and Asia Pacific.
In addition, global demand for the air freight market has declined amid the economic headwinds. As per International Air Transport Association’s (IATA) new data, global demand fell 14.9% compared to January 2022.
Take a detailed look at the stocks mentioned above:
Virgin Galactic Holdings, Inc. (SPCE)
SPCE is an integrated aerospace company that develops human spaceflight for private individuals and researchers in the United States. It also manufactures air and space vehicles. In addition, it designs, develops, and manufactures spacecraft and engages in ground and flight testing and post-flight maintenance of spaceflight vehicles.
SPCE’s ROTA of negative 43.88% is lower than the industry average of 5.18%. Also, its ROCE of negative 72.78% is lower than the industry average of 13.83%.
Its forward Price/Sales of 92.36x is substantially higher than the industry average of 1.28x, while its forward EV/Sales multiple of 54.56 compares with the industry average of 1.61.
SPCE’s operating loss increased 88.6% year-over-year to $153.31 million for the fourth quarter that ended December 31, 2022. The company’s net loss increased 86.7% year-over-year to $150.82 million. Its adjusted EBITDA loss came in at $132.75 million, up 104.9% year-over-year. Additionally, its net loss per share came in at $0.55, representing a 77.4% increase from the year-ago period.
SPCE’s EPS is expected to decline 20.9% to a negative $0.52 for the quarter ending June 2023. It failed to surpass the EPS estimates in all trailing four quarters. It has lost 63.3% over the past year to close the last trading session at $4.04.
SPCE’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall rating of F, equating to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is also rated an F grade for Stability and Sentiment and a D for Value and Stability. In the Airlines industry, it is ranked last among 28 stocks. Click here to see SPCE’s rating for Growth and Momentum.
Astra Space, Inc. (ASTR)
ASTR designs, tests, manufactures, launches, and operates space products and services. Its customers primarily include satellite operators, satellite manufacturers, government agencies, and prime defense contractors.
ASTR’s ROTA of negative 193.79% is lower than the industry average of 5.18%. Also, its ROCE of negative 151.87% is significantly lower than the industry average of 13.83%.
Its forward Price/Sales of 9.23x is 622.4% higher than the industry average of 1.28x.
ASTR’s operating loss increased 369.4% year-over-year to $199.71 million for the third quarter ended September 30, 2022. Its net loss for the period increased by 1125.5% year-over-year to $199.11 million. Also, its loss per share came in at $0.75, up 1150% year-over-year.
Street expects ASTR’s EPS to remain negative this year. Its EPS is expected to fall 29.3% per annum for the next five years. The stock has lost 89.7% over the past year to close the last trading session at $0.43.
ASTR has an overall D rating, equating to a Sell in our POWR Ratings system.
It has an F grade for Stability and a D for Sentiment and Quality. It is ranked #27 in the same industry. We have also rated ASTR for Value, Growth, and Momentum. Get all the ASTR ratings here.
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SPCE shares were trading at $4.05 per share on Thursday afternoon, up $0.01 (+0.25%). Year-to-date, SPCE has gained 16.38%, versus a 5.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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