We came across a bullish thesis on Rocket Lab USA, Inc. (RKLB) on Steve Wagner | Invest’s Substack by Steve Wagner. In this article, we will summarize the bulls’ thesis on RKLB. Rocket Lab USA, Inc.’s share was trading at $9.88 as of Oct 14th.
A rocket launching into the night sky, carrying a satellite payload.
Rocket Lab USA, Inc. (RKLB) is a space launch company that went public in 2021 and specializes in small-satellite launches. Known for its Electron rocket, the company focuses on frequent and cost-effective missions to deploy satellites into orbit.
RKLB generates revenue primarily by providing launch services to government and commercial clients. Its flagship Electron rocket, capable of carrying up to 250 kilograms of payload, has completed over 40 missions since 2017. Rocket Lab’s clientele includes notable government contracts, such as the U.S. Space Force, which has awarded the company over $500M in contracts to design and launch satellites. These contracts provide steady income and bolster RKLB’s credibility in the competitive space industry.
Investors may find Rocket Lab appealing due to its potential to grow within the $1 trillion space economy. The development of the larger Neutron rocket is key to the company’s future, allowing it to compete for larger payload missions and potentially improve gross margins. However, delays in the Neutron’s development—pushed to 2025—pose risks, especially given the company’s ongoing cash burn. RKLB has $500M in cash and short-term investments but remains unprofitable, with a net loss of $177M over the last year against $327M in revenue.
Valuation-wise, RKLB is still in its growth phase, and analysts expect positive cash flow by 2026, assuming the Neutron rocket is successfully launched and utilized for larger missions. Investors should consider RKLB as a long-term play on the burgeoning space sector, but must be mindful of execution risks and delays that could impact the company’s timeline toward profitability.
Rocket Lab USA, Inc. is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held RKLB at the end of the second quarter which was 16 in the previous quarter. While we acknowledge the risk and potential of RKLB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an 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 was originally published at Insider Monkey.