Virgin Galactic Holdings (NASDAQ:SPCE) completed its first commercial flight with Sir Richard Branson on board on July 11, but SPCE stock has drifted down since then. As I expected, the stock moved up ahead of the flight and came down once it finished.

For example, in anticipation of the flight, SPCE stock peaked on June 25 at $55.91. But as of Aug. 6, SPCE stock was at $33.37, down 40.3% from its peak right before the flight on July 11. This is a classic case of “Buy the rumor, sell the news,” just as Barron’s magazine predicted would happen.

This happens quite often in the stock market — actually more than you would believe. The reason is that the stock market generally still believes in the following:

“Greed — for a lack of a better word — is good. Greed is right. Greed works. Greed clarifies…“

This was the theory that Michael Douglas’s character in the 1987 movie Wall Street succinctly put forward. And of course, in the end he was wrong, just like the investors who bid up SPCE stock.

Where This Leaves Virgin Galactic Now

Consider how this runup worked. The investors that bought into the stock and pushed it up prior to the flight clearly believed once the flight was over, other investors would come in. They would now see that the stock was undervalued.

But actually, existing investors realized that SPCE stock was overvalued. For example, at $55.91, it had a market capitalization of $13.464 billion compared to its $8 billion market value now.

But Virgin Galactic will make less than $3 million this year — $2.57 million, according to Seeking Alpha — and just $38.65 million next year. Analyst survey data published by Yahoo! Finance show that analysts estimate $57.34 million in sales for the company next year. This includes space trips for tourists who can pay $450,000 per ticket, according to the company.

So, at today’s market value, SPCE stock has a price-to-sales (P/S) multiple of 140 times (i.e., $8.036 billion divided by $57.34 million.) No wonder SPCE stock has fallen so much.

Now, let’s be realistic here. The market is clearly looking well into the future to value SPCE stock. For example, analysts surveyed by Seeking Alpha believe revenue will hit $377 million by 2024. Even if that happens, this puts SPCE stock on a forward P/S multiple of 21 times revenue. This is still quite high, but puts its price in a reasonable light.

However, we have to discount the 2024 revenue to the present. Using a 15% discount rate means that 3.5 years in the future, the $377 million in 2024  sales have a present value of $231 million, or 61.31% of the future value. This raises the 2024 P/S multiple to 35 times sales, which is still quite high.

What to do With SPCE Stock

Virgin Galactic reported its Q2 earnings on Aug. 5, but these really have little to do with the company’s future outlook. The company had less than $600,000 in revenue for the quarter and lost $94 million in net income. Moreover, its cash burn was $115 million, even though the company ended up with $552 million.

Unless sales start to pick up, Virgin Galactic can probably last another year without another equity raise. If that happens, the company will dilute shareholders. For example, at $5 billion in market value, a $500 million equity raise will dilute shareholders by 10%.

My view is that most defensive investors should wait for a bargain entry price, perhaps at a market value of $5 billion or less. That implies that SPCE stock could drift down another 37.5%. Based on its Aug. 6 price of $33.37, that’s a decrease of $12.51 to $20.86 per share. Most value investors will wait for this to happen before taking a position.