Virgin Orbit shares dump 20% after failed flight. What should I do?

What do you do? Virgin Orbit Holdings Shares (NASDAQ:VORB) and Monday’s test flight have in common? Both went downhill fast. Virgin Orbit shares fell 20% at the market open today, falling to $1.50. This comes after the LauncherOne rocket intended to launch nine satellites into space experienced problems with its secondary engine. Should I use this opportunity as an opportunity to buy shares?

Quickly run down

Virgin Orbit was spun out of Virgin Galactic back in 2021. It was incorporated into a special purpose acquisition vehicle (SPAC) when that type of corporate structure was very popular. Although the hype surrounding SPACs has died down somewhat, Virgin Orbit has been a public stock for the past year in this form.

The business has been operating commercially since 2021, and notes that “has put commercial, civilian, national security, and international satellites into orbit”. Most of this action has been in the US, but it has focused on developing satellite launch capabilities to other countries.

Part of this is to capture the UK market, with flights on Monday due to a statement of intent. As part of the planning, Virgin Orbit aims to turn Newquay airport into Spaceport Cornwall. Unfortunately, the problems with the plane meant that the news coverage was mostly negative. This is the short-term driver behind share prices.

A new sector to explore

If I take a step back, the stock price picture looks even worse. The stock is down 86% in the past year. In its Q3 results presentation, it recorded an adjusted EBITDA loss of $42.9m. Despite a profit of $30.9m for the quarter, high costs eliminated the potential to generate profits.

This did not surprise me, or even worried me massively. These types of growth stocks usually lose money consistently until the business reaches mass scale. Due to the desire to expand in countries ranging from the United Kingdom to Australia, Virgin Orbit could eliminate several years.

However, my main concern is that I don’t know enough about this area. I’m no expert in launching rockets into space. I don’t know how profitable this business can be, or how much of a market there is for the company.

Don’t get me wrong, I’m not an expert on every stock they own. But I have a good understanding of sectors ranging from high-end retailers to large banks. This allows me to make better and more informed investment decisions that are more profitable. I can’t say the same for Virgin Orbit.

Stay away from Virgin Orbit stock

With the share price falling so much in the last year, British flights failing and the sector being weak, I wouldn’t invest.

The business can recover from the bad press and successfully launch in other countries in 2023. If it wins some big government contracts in the following years, it could break even. But in the end I don’t have the vision now to see myself back.