Blog

Discover Why Rocket Lab is the Hottest Space Stock You Need to Buy Now

Hannah Perry | October 16, 2024

Responsive image

The Space Stock That’s a Must-Buy: Rocket Lab

Are you ready to take your portfolio on a stellar ride? If you’re looking for a space industry investment, Rocket Lab (NASDAQ: RKLB) is primed for an extraordinary long-term trajectory. This emerging player in the aerospace sector has seen its stock retreat by over 50% from its 2021 highs, making it an attractive buy-and-hold candidate.

The Case for Rocket Lab as a Space Investment

With the space industry gaining momentum, pinpointing the right investment is crucial. Space is already buzzing with activity from companies launching satellites, and the tourism sector is set to amplify this growth. While heavyweights like Elon Musk’s SpaceX dominate the scene, Rocket Lab stands out as a viable alternative, giving investors the exposure they crave without betting on private companies that aren’t publicly traded.

Rocket Lab primarily focuses on providing spacecraft and rocket launch services to both commercial and government clients. Its specialty in small launches—capable of lifting up to 11,000 pounds—has allowed it to capture approximately 64% of non-SpaceX U.S. orbital launches this year. As it expands its universe to include in-space data and services, Rocket Lab is positioning itself for higher-margin recurring revenue.

Strengthening Client Relationships

The momentum Rocket Lab is building with major clients can’t be understated. Its roster includes notable partnerships with NASA, the United States Space Force, Canon, Synspective, and Tyvak, all vital as Rocket Lab eyes penetration into medium launches—SpaceX’s bread and butter. The company’s upcoming Neutron rocket, anticipated to conduct its inaugural flight by mid-2025, is pivotal. Rocket Lab estimates that the medium-launch market could be worth a staggering $10 billion.

In comparison, SpaceX raked in an estimated $8.7 billion last year, while Rocket Lab reported revenue of just $106 million in Q2, culminating in $326 million over the last four quarters. However, Morgan Stanley predicts that the global space industry could exceed a monumental $1 trillion by 2040, giving Rocket Lab ample room to compete and grow.

Financial Health and Stability

Investing in a burgeoning industry like aerospace isn’t without risk. Startups face high R&D costs, which typically make them speculative investments. Rocket Lab has burned approximately $149 million in cash over the past year but holds $497 million in cash and short-term investments, giving it a financial runway of about three years at its current burn rate.

While the company carried $405 million in long-term debt after a capital raise, typical for young companies, it’s vital to view this in context. The debt consists of convertible bonds due in 2029, giving Rocket Lab the financial clarity it needs to execute its growth initiatives—especially as Neutron gears up for launch.

Current Market Position and Future Catalysts

With the stock still down over 50% from its zenith, despite doubling over the past year, there’s an opportunity on the table. The current $5 billion market cap may seem steep against Rocket Lab’s revenue, but this is a stock where you’re betting on future potential rather than current stats. Analysts suggest the Neutron rocket’s developments could serve as a catalyst to boost market sentiment—and pair that with falling interest rates, and you’ve got a formula for potentially cheaper financing as the company amplifies its growth.

Wrapping It Up

Investing in Rocket Lab entails embracing the speculative nature of the broader space industry. This stock might not yield immediate returns, and volatility could be the name of the game. However, what you’re doing is investing in what could become a SpaceX competitor in its own right—a venture with the right tools and relationships to establish itself as a leader.

If you’re a savvy trader looking to ride the next wave of space industry growth, Rocket Lab warrants your attention. Do your due diligence, but understand that sometimes the most lucrative opportunities lie in the potential of what’s to come.