Virgin Galactic's surging stock price is outpacing Tesla (SPCE)

Shares of the space tourism company surged as much as 35% to a new high in early trading on Tuesday.
Adam Jonas of Morgan Stanley thinks the stock price could "use a breather."
While he's constructive on Virgin Galactic, "the move in the stock price of late appears to be driven by forces beyond fundamental factors," he wrote in a Tuesday note.
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Virgin Galactic is rocketing higher in a rapid surge that's even outpaced Tesla's record-breaking rally.

So far in 2020, Virgin Galactic has gained a searing 148% through Friday's close. In the same timeframe, Tesla has gained 91% in a torrid rally that's led analysts and traders to question the stock's underlying fundamentals .

The space company founded by Sir Richard Branson continued to beat the automaker's gains this week. Virgin Galactic spiked as much as 35% in early trading Tuesday to a fresh all-time high of $38.72 per share, while Tesla gained as much as 8%.

Virgin Galactic's momentum is continuing from Friday when the stock closed 21% higher after the company announced that it had moved its spacecraft VSS Unity from Mojave, California, to New Mexico, where it will one day shuttle passengers to and from space.

The recent rally has led at least one Wall Street analyst to question the stock's climb, saying that the share price could "use a breather."

"We are constructive on the story and rate the stock overweight," Adam Jonas of Morgan Stanley wrote in a Tuesday note. "However, we must acknowledge that the move in the stock price of late appears to be driven by forces beyond fundamental factors."

When Morgan Stanley first initiated coverage of Virgin Galactic in December , its $60 bull-case target represented over 700% upside, he wrote. Today, however, the shares have about 100% upside after just two months.

Jonas also wrote that while Friday's move of the VSS Unity had "some important learnings," he didn't see it as one of the more ambitious tests for the company.

"We believe the investment community still has much more room to better understand the potential of the emerging space economy," he wrote.

In the future, Morgan Stanley thinks the company could even move beyond the $60 bull case as it "executes on key milestones and moves from proof-of-concept to industrial and commercial success."

Virgin Galactic has a consensus price target of $18.50 and three "buy" ratings according to Bloomberg data. The company is due to report is fiscal fourth quarter 2019 earnings on February 25 after market close.

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