Today's surge saw Rocket Lab's share price jump by 11%.
Rocket Lab (RKLB increasing by 7.11%) saw a 11.2% surge in stock price by midday ET on Monday, following Stifel's Friday announcement of an increased price target.
It appears that Stifel analyst Erik Rasmussen adjusted his assessment of the New Zealand-based rocket manufacturing company, raising its valuation by over 50%, from $9 to $15 per share. Rasmussen displays an unwavering belief in Rocket Lab's ability to successfully introduce its new Neutron rocket to the market.
Neutron's imminent arrival
Rocket Lab CEO Sir Peter Beck made a promise back in 2021 that Neutron, the medium-lift vehicle, would commence launches in 2024. Although that goal seems unlikely to be achieved, and as of now, Rocket Lab aims for a mid-2025 launch date, it's still reasonable to anticipate the launch happening before the year ends.
A four-year timeline from concept to launch would remain quite impressive within the rocket industry.
Rasmussen predicts this would stir up competitive dynamics, especially in the non-small rocket launch market, currently dominated by SpaceX, United Launch Alliance, and Arianespace in Europe. Notably, Rasmussen expects Rocket Lab to make its mark in the U.S. government launch missions market.
The genuine impetus to invest in Rocket Lab
Rasmussen believes Rocket Lab is well-positioned to capitalize on the upward momentum of various high-profile space projects. He expects this market to potentially grow even more rapidly than the space launch sector, potentially reaching a staggering $300 billion annually worldwide.
From my perspective, this is the primary motive behind investing in Rocket Lab stock. Historically, rocket launches have brought with them limited profit margins. As more competitors enter the market, these margins are likely to shrink even further. Meanwhile, Rocket Lab's space systems business manages to achieve gross profit margins roughly double that of its launch services business (which currently yields 11%).
While fans of Neutron may be eager about its arrival next year, keep a close eye on the progress of Rocket Lab's satellite business instead.
Investors who are considering putting money into Rocket Lab might be attracted to its strong financial performance, as indicated by Rasmussen's increased valuation of the company from $9 to $15 per share. The gross profit margins of Rocket Lab's space systems business currently outperform its launch services business by about double, potentially making it a more profitable venture in the long term.
Following Stifel's positive analysis and the potential arrival of Neutron, which could shake up the non-small rocket launch market, now might be an opportune time for individuals interested in investing in the finance sector to explore options in Rocket Lab's stock.
