I’ve been following Virgin Galactic (NYSE:SPCE) stock since not long after it joined the public markets. It’s been a bumpy ride.

In November, just days after its SPAC (special purpose acquisition company) merger closed, I highlighted SPCE stock on my Moneyline podcast. At the time, SPCE stock already looked like a disappointment.

One of the first growth companies to go public via the SPAC route, Virgin Galactic saw its share price drop almost immediately below the $10 merger price. By the end of the month, it was at $7.

And by February, it was above $35. In fact, SPCE was the best-performing stock of early 2020 — until the novel coronavirus pandemic hit. Like the rest of the market, it immediately plunged.

The rest of 2020 saw a volatile recovery. 2021, too, started with a bang, thanks to some help (probably) from the “Reddit rally” and from general optimism toward the dozens of growth companies that followed Virgin Galactic into SPAC mergers.

And now we’ve had a 50%-plus haircut just from last month’s highs.

In other words, it’s been a roller-coaster. It’s going to be a roller-coaster going forward, too.

This is a company pioneering “space tourism” after all. It’s an enormously ambitious project. Like all ambitious projects, it’s high-risk and high-reward.

That in turn is going to create volatility as we await the company’s next steps toward success.

As this history shows, SPCE stock is not to be owned with money an investor can’t afford to lose, or by investors unwilling to ride out some possibly nausea-inducing drops. But for investors tolerant of risk, the short-term pullback creates a lower entry point for an attractive long-term case.

What We Don’t Know

There are few stocks based more on faith and feel than SPCE.

After all, the core fundamental question about SPCE stock, or any stock, is simple: what is it worth? We do our best to answer that question by understanding what the future holds.

But how do you answer that question about a company that’s literally creating an industry? It’s impossible. We don’t know what Virgin will charge once it establishes itself. The initial price will be $250,000 (plus a free jumpsuit) but that is expected to come down sharply as flights increase.

We don’t know, exactly, what the long-term price will be — because it’s impossible right now to precisely estimate the costs of flying repeatedly into orbit.

Since we don’t know what the price will be, we have no idea what demand will be. As of Dec. 31, according to a filing with the U.S. Securities and Exchange Commission, Virgin had “approximately 600 reservations” and over $80 million in deposits. Of course, that number will increase — but by how much?

The Uber-Bull Case for SPCE Stock

Let’s focus on what we do know, then. After the pullback, SPCE has a market capitalization under $7 billion. Bear in mind that’s a reasonably manageable figure on its own.

Because there’s an obvious scenario in which Virgin Galactic becomes a roaring success. Initial flights take millionaires into orbit for a quarter-million dollars a pop. Within a few years, the operations are mainstream and cost, say, $20,000 — cheap enough for even upper-middle class flyers worldwide to take the “trip of a lifetime.”

The company’s efforts in supersonic travel show some early promise as well. Virgin Galactic has become a technological leader, and a giant whose profits compete with those of established airlines.

What is Virgin Galactic worth then? Again, we don’t precisely know. But the world’s most valuable airline, when including debt, is valued at close to $50 billion.

If there’s even a small chance — say, 10% — that SPCE is worth $50 billion in eight or 10 years, that alone means real value for the stock today.

Add in the likelihood of Virgin Galactic becoming a niche, yet profitable, ultra high-end travel play and it’s not terribly hard to see the current valuation being supported. It’s certainly a lot easier to get to $6.6 billion than to the $14 billion valuation applied just a few weeks ago.

Mind the Risks

But I’ll say it again: this is a high-risk play.

This is a stock that is one accident away from a major plunge. Even the pullback from last month likely was caused at least in part by delayed test flights. So much relies on every step that Virgin Galactic takes that SPCE stock can see huge swings on any piece of news.

Longer-term, it’s obviously possible that the business doesn’t quite work. There is a difficult problem here, in that Virgin needs to lower its prices over time to meet maximum demand — but can’t lower those prices without enough initial demand to fill its schedule and drive economies of scale. Meeting that challenge will require precisely threading the needle.

It’s even possible that the business works — but for someone else. There are many other private companies now targeting manned spaceflight for various purposes. It’s a different “space race” than that of the 1950s and 1960s, but it will be just as competitive.

This is a stock that is going to take time. It will take patience. It will see some volatility. SPCE stock is not a play for every investor.

But it’s a good play for the right kind of investor. It’s a better play with the price cut in half.

On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in the article.

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