Belying the otherwise positive development, shares of Rocket Lab (NASDAQ:RKLB) fell conspicuously on Friday. The red ink followed an announcement earlier this morning that the launch services and space systems specialist successfully deployed a satellite for a Japan-based Earth imaging company. Unfortunately, that wasn’t enough for RKLB stock, which dipped sharply, possibly on profitability concerns.
According to the accompanying press release, Rocket Lab’s launch represented no. 42 for its Electron rocket. It was also the company’s 10th Electron launch for this year. Notably, this achievement surpassed the company’s prior annual record of nine launches in 2022. As well, the statement emphasized that the Electron retained the title of second-most frequently launched U.S. rocket annually.
Further, the mission supported Japan’s Institute for Q-shu Pioneers of Space, Inc. (iQPS). Specifically, the underlying Electron rocket lifted off from the company’s commercial spaceport Launch Complex 1 in New Zealand. Interestingly, the iQPS-SAR-5 satellite is a synthetic-aperture radar (SAR) satellite that will collect high-resolution images of Earth.
This satellite will join another iQPS satellite already in orbit. Eventually, they will form part of a 36-satellite constellation capable of monitoring Earth at specific fixed points every 10 minutes. Significantly, the mission went from contract signing to successful launch in just eight months.
That should boost credibility for Rocket Lab, which then begs the question: Why is RKLB stock down today?
RKLB Stock Possibly Fell on Forward Profitability Concerns
On the surface, nothing stood out in the recent news cycle as a negative catalyst for RKLB stock. Indeed, management was understandably all smiles following the successful launch. “It has been a privilege to provide the team at iQPS with a dedicated ride to orbit on an accelerated timeline and we’re honored to play a key role in building out their SAR constellation with Electron,” remarked Rocket Lab Founder and CEO Peter Beck.
Adding to the perplexing situation, RKLB stock enjoys a massive total addressable market. For example, regarding just the nanosatellite and microsatellite segment, the global sector may hit a valuation of $13.89 billion by 2030. If so, that would represent a compound annual growth rate (CAGR) of 23.3% from 2022.
However, Rocket Lab is an end-to-end space enterprise. And that market (the global space technology sector), according to Grand View Research, already posted a valuation of $420.2 billion last year. Further, the sector could end up printing revenue of $731.8 billion by 2030, a CAGR of 7.5% from 2023.
Nevertheless, because the space economy imposes a capital-intensive framework, investors may be worried about a pathway to profitability. In the company’s income statement, revenue growth has slowed (sales of $211 million in 2022 versus only $236.4 million in the trailing 12 months) while net losses expanded from $135.9 million last year to $169.3 million TTM.
Further, free cash flow is a loss of $46.2 million in the third quarter against cash and cash equivalents of $288.4 million.
Why It Matters
At the moment, analysts rate RKLB stock a consensus moderate buy. This assessment breaks down as five buys and two holds. Overall, the average price target lands at $7.39, implying over 57% upside potential from the time of writing.
On the date of publication, Josh Enomoto 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 InvestorPlace.com Publishing Guidelines.
