Rocket Lab Stock Worth Considering Despite Being Slow to Launch

Special purpose acquisition companies (SPACs) went from red hot to ice cold in record time. With the sector in a huge bust, investors have seemingly given up on any and all SPACs, and some exciting firms are getting lost in the shuffle. Rocket Lab (NASDAQ:RKLB) is one such example.

Rocket launching into space
Source: 3Dsculptor /

The launch and space systems company went public on Aug. 25 through a reverse merger with special purpose acquisition company Vector Acquisition. RKLB stock dropped nearly 10% on its first day of trading to $10.43. However, shares briefly popped above $20 in early September following the release of Rocket Lab’s first earnings report as a publicly traded company. Today, shares sit around $14.

For a company as promising as Rocket Lab, traders probably expected a more auspicious start. Hot SPAC deals such as electric vehicle startup Lucid Group (NASDAQ:LCID), for instance, got a much warmer reception from investors.

Although RKLB stock hasn’t rocketed to the stars just yet, shareholders have reason to be optimistic. This fascinating firm could become a major player in the space industry.

Rocket Lab’s Place in the Sector

Space may be infinite, but the space stock arena is quickly becoming crowded.

Virgin Galactic (NYSE:SPCE) was one of the pioneers in making both SPACs and space companies popular with retail investors. It went public in 2019 through a merger with Chamath Palihapitiya’s SPAC, Social Capital Hedosophia. Since then, we’ve seen a variety of companies related to satellites, launch vehicles and space-based cellular broadband go public. The floodgates are truly bursting wide open, and Rocket Lab is one of the latest to join the party.

Rocket Lab has been described as “a mini SpaceX,” as both companies have developed successful launch-services businesses. Rocket Lab is the leader in the small-launch marketplace with its reusable Electron rocket that has already sent more than 100 satellites in low-Earth orbit. And it is developing the Neutron rocket, which will compete with SpaceX’s Falcon 9.

Rocket Lab is far more than a mini SpaceX, though. The company is attacking the space market on several fronts, describing itself as an “end-to-end space company delivering reliable launch services, spacecraft, satellite components and on-orbit management.” In other words, Rocket Lab is a broad-based company serving almost all parts of the total addressable space-related market.

According to the company, its current customer breakdown is 50% commercial, 30% defense and 20% civil. It counts the National Aeronautics and Space Administration (NASA) and Defense Advanced Research Projects Agency (DARPA) among its clients, along with numerous corporations.

RKLB Stock Has a Potential Valuation Problem

Rocket Lab’s story is compelling, but its valuation could be a concern. InvestorPlace contributor Mark Hake recently made the argument for why RKLB stock isn’t worth chasing at its current price.

The problem Hake points out is a common one for SPACs: There simply isn’t enough current revenue to back up the share price. Rocket Lab is forecast to generate just $54 million in sales in 2021. That’s fine as it’s just getting going as a public company.

In 2022 and 2023, analysts expect $179 million and $268 million in revenues, respectively. That makes for an eye-catching growth rate, assuming management can hit those targets, even if the actual figures are still fairly underwhelming.

However, with a current market cap above $6 billion, investors are paying well above 20 times projected 2023 revenues for RKLB stock. And, as we’ve seen with other SPACs, revenue often falls short of initial expectations.

Turning to earnings, Rocket Lab is projected to run large losses this year and in 2022. In 2023, analysts expect the firm to roughly break even. That’d be a promising development, particularly in combination with a healthy revenue growth rate. The company’s large cash position also helps support the bull case. Still, there’s a lot of market capitalization riding on this firm at an early stage in its overall development.

RKLB Stock Verdict

While RKLB stock hasn’t soared, it has outpaced most of its SPAC rivals in recent weeks. And there will no doubt be a lot of interest in space investments as SpaceX, Blue Origin and others continue to push the boundaries of what’s possible.

Rocket Lab and RKLB stock should have a significant part in that story as the industry continues to evolve.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek. 

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