Virgin Galactic stock jumps on SpaceX competition speculation

Shares of Virgin Galactic (NYSE:SPCE) surged 10% in premarket trading, while Rocket Lab (NASDAQ:RKLB) rose 3.5%, and Boeing (NYSE:BA) saw a modest 0.5% uptick. The movement comes after an analyst suggested these companies could benefit from a potential shift in government funding away from SpaceX.

The speculation follows Elon Musk’s announcement on Thursday that SpaceX will not decommission the Dragon spacecraft, reversing his earlier threat to do so amid a public dispute with President Donald Trump. The Dragon capsule is critical to U.S. space initiatives, being the only active vehicle capable of transporting humans to and from the International Space Station (ISS), especially after Boeing’s Starliner failure.

Keybanc analyst Michael Leshock commented on the situation, stating, "Space stocks are moving higher after the close, including RKLB (+6%) and SPCE (+10%), on Musk’s indication of potentially decommissioning an important spacecraft — the Dragon capsule." Leshock’s analysis indicates that while the U.S. government is likely not to sever ties with SpaceX, any reduction in reliance on the company could be a boon for smaller space ventures.

This week’s Space Tech Expo in Long Beach, CA, underscored the government’s interest in nurturing smaller space companies to diversify its space program’s dependencies. Leshock sees this as a potential catalyst for these companies, especially if the current friction with SpaceX leads to increased government investment in alternatives like Rocket Lab’s Neutron rocket for medium and heavy-lift vehicle launches.

Leshock added, "we think the government is incentivized to NOT break ties with SpaceX; however, if it did, it would represent a meaningful opportunity for a swath of commercial space companies." This sentiment captures the potential upside for companies like Virgin Galactic, Rocket Lab, and Boeing’s ULA should they capture a portion of the space contracts currently held by SpaceX.

Investors appear to be reacting to the potential for increased competition in the space sector, with particular attention to how government contract shifts could impact these companies’ fortunes. While the exact outcomes remain to be seen, the market’s response indicates a perceived opportunity for these space industry players.