Our Stock of the Week is Rocket Lab USA, Inc (RKLB). While relatively small, the space industry is one of the fastest-growing niche markets in the world. Elon Musk’s SpaceX has gained tremendous attention as it plans a Mars mission and continues to innovate after years of little action by NASA. Demand for satellites is booming due to internet applications.
RKLB provides launch services, spacecraft design services, spacecraft components, and spacecraft manufacturing. It designs and manufactures small and medium-class rockets, including the Electron, a reusable orbital-class small rocket, the Photon satellite platform, and the Neutron 8-ton payload class launch vehicle.
Recently, the company successfully tested its Archimedes engine, which will power the Neutron rocket, which has a significant increase in payload and will provide a major boost to RKLB’s revenue per launch.
There is a lot going on here, but the easiest way to see it is that revenues grew 71% last quarter, and the company has a backlog approaching $1 billion and also has over $500 million in cash to fund its programs.
The stock is expensive, with a market cap of over $3 billion and about 8x revenues, but all stocks with tremendous potential tend to look expensive at early stages of growth.
Technically, the stock has a very favorable pattern as it forms a cup-with-handle pattern and pulls back to key support at around $6.
I anticipate that September may be a rough month for the market, but RKLB is a name that I’d like to buy on weakness in the month ahead. There should be substantial news flow for RKLB and space stocks in general, which will provide a supply of buyers. The rescue of stranded astronauts by SpaceX early next year is one illustration of how the Space industry is ready to rocket.
This post is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this post. Do not buy, sell, or trade the stocks mentioned herein. We WILL actively trade this stock differently than discussed herein. We will sell into strength and buy or sell anytime for any reason. We will actively trade into any unusual activity. At the time of this post, principals, employees, and affiliates of Shark Investing, Inc. and/or principals, clients, employees, and affiliates of Hammerhead Financial Strategies, LLC, directly or indirectly, controlled investment and/or trading accounts containing no positions in RKLB. To accommodate the objectives of these investing and/or trading accounts, the trading in these shares will be contrary to and/or inconsistent with the information contained in this posting.
