We recently published a list of 10 Stocks That Will Go to the Moon According to Reddit. In this article, we are going to take a look at where Rocket Lab USA, Inc. (NASDAQ:RKLB) stands against the other stocks.
FINRA Investor Education Foundation and CFA Institute (2023) revealed that ~37% of Gen-Z investors in the US and ~38% in the UK come to social media influencers regarding investment decisions. Therefore, it is important to explore the role finfluencers (influencers sharing financial advice on social media) play in providing investment information and how Gen-Z investors engage with finfluencers. Young investors are considering memes and viral videos as the primary source of investment advice.
Social Media and Investments: Do They Complement Each Other?
Experts believe that retail or non-professional investors are now becoming dependent on digital channels, like social media platforms such as TikTok, when it comes to investing.
FINRA revealed that ~60% of US investors under age 35 believe that social media can be used as a source of investment information. This compares to ~57% who use finance professionals. This increase is probably because digital channels are becoming easily accessible, with ~60% of the global population utilizing social media (as per DataReportal).
Quick-scroll websites are now considered the go-to spot for investment ideas and inspiration. This is because of their bite-sized format and easy access. Ofcom, which tracks news consumption in the UK – revealed that TikTok’s reach for news went up from ~1% in 2020 to ~7% in 2022. This was mainly seen in younger folks aged between 16 – 24 years. Pew Research mentioned that, in the US, this increased from ~3% in 2020 to ~10% in 2022.
Financial advice content, which is shared on social media, has been contributing to the growth of the “creator economy,” which is pegged at ~$127 billion globally (as per Coherent Market Insights). This is expected to reach US$528.39 billion by 2030, with growth stemming from higher demand for user-generated content and increased monetization opportunities. Financial institutions and investment advisory companies are now focusing on creating pathways from social media to their product and services to exploit strong market opportunities. Therefore, most retail investors continue to make investing decisions under social media’s influence.
Retail Traders Making a Significant Portion in The US Stock Options
JPMorgan Chase & Co. highlighted that non-professional investors are now making a bigger part of the US options market as they continue to pour money mainly into short-term bets and technology stocks. The bank highlighted that retail traders accounted for ~18.3% of the total options activity in June. Social media and online investing communities have influenced retail investors to the extent that these investors don’t shy away from making investments in the downturn.
In late July and early August 2024, when there was a sharp decline in popular technology shares, retail investors turned out to be net buyers.
Vanda Research mentioned that individual investors, who were caught up in the market downturn, continued to be net buyers of shares of leading technology and AI-related companies. Just to balance out the risks, retail investors directed significant buying to an ETF tracking 20-Y Treasury bonds. Wall Street experts and enthusiasts believe that this confidence comes from the online investing communities and social media platforms, where there were discussions about going long on leading technology shares as they were trading at “decent levels.”
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A launch pad atop a grassy hill, smoke filled sky from a successful voyage to space.
Rocket Lab USA, Inc. (NASDAQ:RKLB)
Number of hedge fund holders: 15
Rocket Lab USA, Inc. (NASDAQ:RKLB) is engaged in space, building rockets, and spacecraft. The company offers end-to-end mission services which provide frequent and reliable access to space for civil, defense, and commercial markets.
The tiny rocket maker has made a strong start as it focused on getting closer to one of the most important customers: the U.S. government. This was evident when Rocket Lab USA, Inc. (NASDAQ:RKLB) decided in 2019 to invest millions of dollars in establishing a Launch Complex 2 (LC-2) in the US near the NASA facility on Wallops Island in Virginia. The investment indeed paid off as, in late 2023, the US Space Force named the company as one of its prime contractors. This led the company to fetch a $515 million contract to build satellites for a new missile defense system.
Recently, Space Force awarded Rocket Lab USA, Inc. (NASDAQ:RKLB) $14.5 million to launch an experimental “DISKSat” disk-shaped satellite. The new mission is under the scope of the Space Force’s Assured Access to Space program.
Rocket Lab USA, Inc. (NASDAQ:RKLB) is second only to SpaceX with respect to launching rockets for commercial use. Since SpaceX mainly focuses on larger payloads, Rocket Lab USA, Inc. (NASDAQ:RKLB) has a near monopoly in the small payload market. The company’s electron rocket has been able to establish itself as a leader in launch frequency and precision, while the upcoming Neutron vehicle should help the company expand its market presence. The development of the Neutron medium launch vehicle continues to progress on schedule, and the first launch is expected in the middle of the next year.
For 3Q 2024, the company expects revenue of between $100 million and $105 million. Notably, 4 analysts have given a “Hold” rating on the shares of Rocket Lab USA, Inc. (NASDAQ:RKLB), and 6 analysts gave a “Buy” rating. In the second quarter, 15 hedge funds had stakes worth $95.2 million in Rocket Lab USA, Inc. (NASDAQ:RKLB).
Overall RKLB ranks 8th on our list of stocks that will go to the moon. While we acknowledge the potential of RKLB as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than RKLB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.