Rocket Lab USA RKLB has lately been in the headlines for its multiple achievements in the space industry over the past month. Notably, in January, the company announced its selection by Kratos Defense & Security Solutions, for a five-year contract, for the Multi-Service Advanced Capability Hypersonic Test Bed (MACH-TB) 2. Earlier in December, the company successfully completed its 16th launch for the year by deploying a satellite for Japanese Earth-observation constellation operator -Synspective.
In the same month, the company successfully delivered its second Pioneer spacecraft to Vandenberg Space Force Base. Also, in December, RKLB announced a launch window for an upcoming Electron mission to deploy the latest satellite in Synspective’s growing Earth observation constellation.
Such successful accomplishments mentioned above might encourage investors to add RKLB stock to their portfolio. However, before making any hasty decision, let’s delve into the company’s performance over the past year, growth opportunities and investment risks (if any). This way, investors can take an informed decision.
RKLB Stock Beats Industry, Sector & S&P500
Rocket Lab’s shares have surged a massive 430.2% in the past year, outperforming the Zacks aerospace-defense industry’s decline of 6%. It has also outpaced the broader Zacks Aerospace sector’s rise of 4.7% as well as the S&P 500’s gain of 25% in the same time frame.
Image Source: Zacks Investment Research
A similar stellar performance has been delivered by other industry players, such as Embraer ERJ, Leidos Holdings LDOS and RTX Corp. RTX, whose shares have surged 109.7%, 35.9% and 33.9%, over the past year.
What Led to RKLB Stock’s Price Surge?
The commercial space market has grown significantly over the past decade, thereby driving demand for Rocket Lab’s launch services, spacecraft design, manufacturing, components and on-orbit solutions.
On the other hand, as governments are enhancing national security to tackle rising global tensions, demand for satellite deployments in military applications has also been rising. Against this backdrop, Rocket Lab’s Electron small launch vehicle has emerged as a key growth driver, catering to real-time intelligence needs with small payloads.
Impressively, since its debut in 2017, Electron has become the leading small spacecraft launch vehicle, delivering more than 197 satellites into orbit across 46 successful missions for government and commercial clients as of Sept. 30, 2024. This underscores the strong demand that Electron enjoys in the space industry, which must have also resulted in the strong performance of RKLB at the bourses, as mentioned above.
Will RKLB Stock Continue Its Rally?
According to a World Economic Forum report from April 2024, the space economy may reach $1.8 trillion by 2035, driven by the growing use of satellite and rocket-enabled technologies. This outlook strengthens Rocket Lab’s growth prospects, with its Electron ranking as the second most frequently launched orbital rocket by U.S. companies.
To stay at the forefront of space technology, Rocket Lab is advancing innovations like the reusable-ready Neutron launch vehicle. With a payload capacity of up to 15,000 kg for expendable launches to low Earth orbit, Neutron is designed for versatile missions. It is expected to support nearly all spacecraft launches through 2029.
Such market prospects, coupled with RKLB’s innovations, offer solid growth opportunities for the company.
A quick sneak peek at its near-term estimates mirrors similar growth prospects.
Upbeat Estimates for RKLB Stock
The Zacks Consensus Estimate for RKLB’s 2024 and 2025 sales suggests an improvement of 77.3% and 31.6%, respectively, year over year.
A similar year over year improvement is observable by taking a look at its 2024 and 2025 earnings estimates.
Image Source: Zacks Investment Research
Risks to Consider Before Choosing RKLB Stock
While Rocket Lab presents significant growth opportunities, it faces notable challenges. A key risk lies in its high operating expenses, caused by investments in innovations like the Neutron launch vehicle, Electron’s first-stage recovery, advanced spacecraft capabilities and an expanded portfolio of components. These expenses often offset revenue gains, leading to losses, as evident from its recent quarterly reports.
Looking ahead, Rocket Lab anticipates rising operating costs, and if revenue growth fails to match these cost increases, profitability may remain elusive. Additionally, the company faces potential delays and complications in designing, manufacturing and commercializing new technologies. Failure to deliver and monetize innovations could adversely impact Rocket Lab’s financial performance and prospects.
RKLB Stock Trading at a Premium
In terms of valuation, RKLB’s forward 12-month price-to-sales (P/S) is 23.60X, a premium to its industry’s average of 1.60X. This suggests that investors will be paying a higher price than the company's expected sales growth compared to that of its industry.
Image Source: Zacks Investment Research
Should You Buy RKLB Stock Now?
To conclude, investors interested in Rocket Lab should wait for a better entry point, considering its premium valuation and the challenges it is facing in terms of high operating expenses.
However, those who already own this Zacks Rank #3 (Hold) company’s shares may stay invested due to RKLB’s upbeat estimates, benefits of the steadily growing space economy and solid share price performance.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Research Chief Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpEmbraer-Empresa Brasileira de Aeronautica (ERJ) : Free Stock Analysis Report
Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
RTX Corporation (RTX) : Free Stock Analysis Report
Rocket Lab USA, Inc. (RKLB) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
