The spaceflight industry has witnessed an incredible surge since the market debut of several companies within the sector a few years back. With burgeoning developments and a rapidly growing space economy, companies like SpaceX are even contemplating establishing artificial intelligence (AI) data centers in orbit using their expansive Starship system. However, for retail investors looking to invest in SpaceX directly, the wait continues for the anticipated initial public offering (IPO), rumored to be scheduled later this year.
In the meantime, those seeking exposure to the space economy can turn to Rocket Lab (RKLB), one of the few publicly traded companies directly competing with SpaceX for launch contracts. Rocket Lab has demonstrated remarkable growth, achieving a revenue increase of nearly 900% over the past five years.
Current stock evaluations reflect significant fluctuations, with Rocket Lab facing a decrease of 7.50% recently, bringing its current price to $70.84. As of now, the company’s market capitalization stands at approximately $38 billion, with a day’s trading range between $69.42 and $78.21. Over the past year, the stock has encountered a range between $14.71 and $99.58, with an average trading volume of 23 million. Notably, the company’s gross margin is recorded at 28.93%.
Rocket Lab operates as a launch provider for both commercial and military purposes, utilizing its small Electron rocket, which delivers payloads to orbit with high precision. With a successful track record of operations, the company has amassed a backlog of over $500 million in contracts as of last quarter. Beyond rocket launches, Rocket Lab has ventured into satellite design, contributing to its space systems segment, which now generates over $100 million in quarterly revenue, surpassing its launch segment.
Looking ahead, Rocket Lab plans to continue utilizing its Electron rocket while significantly expanding capabilities with the anticipated launch of its Neutron rocket. The Neutron, which will be considerably larger than the Electron, aims to shift the competitive landscape by enabling the delivery of more substantial payloads. This could potentially translate to revenue of up to $50 million per launch, mirroring rates established through SpaceX contracts.
While the testing and commercial deployment of the Neutron rocket have experienced some delays, the company is optimistic about achieving its first commercial launch by 2026. This critical development could substantially increase Rocket Lab’s revenue, with just one Neutron launch potentially accounting for nearly 10% of its recent trailing revenue of $554 million.
In a decade’s time, Rocket Lab could be executing multiple launches each year with both its Electron and Neutron rockets. Additionally, expansion in its space systems capabilities could lead to bundled service offerings for both commercial and military clients. Speculations suggest that the company may also contemplate building its own satellite constellation, further enhancing its revenue potential.
However, challenges loom for Rocket Lab, particularly regarding the stock’s valuation. At a current market cap of $40 billion, there are concerns that this already incorporates a significant amount of projected growth. Future shareholder dilution is also anticipated, raising questions about the company’s ability to maintain a viable profit margin amidst the typically low margins prevalent in the spaceflight industry. Realistically, even with potential revenue reaching $10 billion, justifying the market cap may prove difficult.
Considering these factors, projections indicate that Rocket Lab stock may struggle to deliver favorable returns for investors over the coming 10 years.
