No one is buying Virgin Galactic (NYSE:SPCE) stock for the underlying financials.

The group is nowhere near turning a profit and only started posting revenue figures in the second quarter.

It’s an unproven play on commercial space flight that requires investors to blindly trust eccentric billionaire Richard Branson. It’s one of the only ways investors can access this market, and that’s evident in the fact that the share price has nearly tripled since the start of 2020. 

So why buy? And better yet, should you even pay attention to SPCE results?

A Closer Look at SPCE Stock

First lets look under the hood. While it’s true that the group’s existing business is of little consequence to investors right now, space travel is only valuable from an investment point of view if it’s profitable.

Sending a bunch of rich people for a spin around the world is pointless if it costs so much to get them there that the ticket price only just covers the expenses. If ticket prices are too high, it becomes a once-in-a-lifetime experience even for the one-percenters, which is a limited addressable market as it is.

A few trips is all it would take to exhaust the list of potential customers. So, the theoretical nuts and bolts, vague and risk-laden as they may be, are a very important part of the investment case. 

The most recent results show that the group’s free cash outflow decreased from $176.7 million last year to $168.1 million.

That’s a lot of money to be walking out the door, but when you’re building and testing spacecraft for a space travel company that isn’t yet operational, it’s to be expected. What’s important is that figure is going down as the group’s losses narrow and spending slows. 

The group managed to bring in $2.6 million during the quarter, presumably by selling a handful of $450,000 a-piece tickets to space.

SPCE aims to sell 1,000 seats before starting up its commercial service in the fourth quarter next year. With about 700 of those seats already spoken for, we can expect $135 million in revenue spread over the next 5 quarters.

The group spent $50 million in selling and general expenses during the third quarter, up from £31 million last year. Research and development added another $36 million to the expense pile, so it’s reasonable to assume that the group will have to spend somewhere between $70 million and $85 million per quarter.

With a prospective income of $27 million each quarter, it’s safe to say there’s no chance of SPCE being in the black anytime soon. 

Is Space Profitable?

The important question for investors is a path to profitability. Is there one? The first big consideration is whether the group can sell 1,000 tickets into space. The next is whether it can sell 1,000 more and so on.

At $450k a pop, it’s not a cheap holiday, but it’s affordable to the world’s elite. And affordable enough that they could do it more than once. After all, Jay Z’s car costs 18 times that. 

The next question is how much it’ll cost to send these specialized aircraft into space. They’re not equipped to take more than a handful of people up each flight, so just servicing the 1,000 pre-orders will take time and money.

Presumably Virgin Galactic has already worked this out, and $450k is enough to cover these costs—but it’s worth bearing in mind that the company will have to get about 155 people into space each quarter to cover costs once the group’s service is up and running. 

Looking at traditional airlines, this looks doable—but commercial space flights are uncharted territory. Its unclear how much maintenance the planes will need to keep them operating safely and whether the group will be cleared to launch 15 or so planes into the stratosphere every month. 

The Bottom Line

Investing in the race to put the general public in space isn’t for the faint of heart.

There’s really no way to conduct a rational fundamental analysis of the companies involved. Instead, buying SPCE stock is a long-term bet on continued, accessible space travel. We won’t have any idea whether the company is well poised to profit from it for years to come.

Much like Tesla’s (NASDAQ:TSLA) humble beginnings, investors simply have to have faith that the erratic billionaire in charge can deliver. Doing the math on Tesla’s underlying financials 5 or 10 years ago yielded a similar story—but the group’s most recent results show there is a way to make and sell high-end electric cars for a profit.

The same could be true for SPCE stock, but there are no guarantees. 

On the date of publication, Laura Brodbeck did not have (either directly or indirectly) positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Laura Hoy has a Finance degree from Duquesne University and has been writing about financial markets for the past 8 years. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN.