Rocket Lab USA (RKLB)
A stock from our May 11th watchlist - you can see why we were interested in the trade here.
The race to more efficient space travel is heating up, with companies around the globe scrambling to launch vehicles and satellites into orbit and back. One of those companies is Rocket Lab, which has recorded 63 small satellite launches in its lifetime and has partnered with the U.S. Air Force Research Laboratory for a launch and return to earth mission in the next 12-18 months.
The company’s pride and joy is their Neutron rocket, which is a partially reusable (SpaceX approach) launch vehicle that could carry 28,700lb to low Earth orbit. Space companies are racing to become THE go-to launch company for constellation deployment and interplanetary missions. In basic words, they’re trying to make it easier to send things to space and come back using that same vehicle without high costs.
Rocket Lab’s numbers have seen a notable uptick in recent years, with revenue nearly doubling between 2023 to 2024. The company ended last year with $436M in revenue, up 78%, but their biggest struggle has remained their bottom line. Luckily, investors recognize that small companies, especially those who have high ambitions and/or are in manufacturing, often don’t have strong profits because the capital is going into research and development. What’s important is revenue growth, which Rocket Lab is doing just fine.
If one is looking to buy Rocket Lab right now, they should be investing in the story more so than the numbers. Valuation at this stage may be difficult to assess because the industry has a very large upside potential, and if Rocket Lab can deliver on their promises then they can own a big piece of the aerospace & defense space. The $22 billion valuation the stock exceeded on its recent run is likely attributed to the hope around their products, but hope is not a viable long term fuel. This is not yet a safe “buy and forget” type investment, but it is one to pay close attention to as they successfully complete more missions and land bigger contracts.
New Update:
Rocket Lab is definitely stretched out, but that doesn’t necessarily mean the stock will sell-off. Look at $RBLX (Roblox) for example…the stock has displayed “overbought” signals since the initial breakout in May, yet it has nearly doubled since.
One of my favorite approaches to maximize returns on rallies is using the 10/20 day moving averages on the daily chart. In the example of Roblox, you’ll see $RBLX holding those lines since its initial breakout. One could enter $RKLB and utilize the moving averages as support points. Hold as long as it defends those lines and close once it breaks below either the 10 or the 20 MA.
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