Rocket Lab: A Top-Performing Space Stock With Growth Potential

Key Points

• Rocket Lab has soared 280% this quarter, emerging as a retail favorite and a potential competitor to SpaceX in the booming space industry.
• The company’s Electron rocket and $515M defense contract showcase its operational excellence, while the upcoming Neutron rocket could redefine its position in heavy-lift launches.
• With strong earnings, growing institutional ownership, and a 100% increase in analyst price targets year-over-year, RKLB remains a compelling opportunity despite its recent dip.

Rocket Lab USA Inc. NASDAQ: RKLB has emerged as one of the most impressive performers in the aerospace and defense sector in 2024. The stock has gained an astounding 280% this quarter alone, cementing its status as a favorite among retail investors. 

As the space industry grows increasingly competitive, Rocket Lab is positioning itself as a formidable contender to SpaceX, with Elon Musk’s company valued at nearly $350 billion. With RKLB shares pulling back 18% from their 52-week high, investors might wonder if this dip presents a fresh buying opportunity in the space race.

Diversified Revenue Streams and Strategic Progress

Rocket Lab's success is rooted in its diversified business model, with approximately 70% of its revenue coming from its launch and space services operations. The company's Electron rocket, designed for launching small satellites, has been pivotal to its growth. As of November 2024, Rocket Lab has conducted 54 Electron launches, achieving a 92.6% success rate. With the global demand for small satellite launches expected to skyrocket, over 10,000 satellites may need launching by 2030, and the company is well-positioned to capture this opportunity.

Recent achievements further highlight Rocket Lab’s progress. The company secured a $515 million contract with the U.S. Space Development Agency to design and produce 18 satellites, marking its debut as a major defense contractor. Additionally, it received $23.9 million in CHIPS Act funding to enhance semiconductor manufacturing for space applications. Operational milestones, such as launching two satellites within 24 hours and delivering five satellites for Kineis, underscore Rocket Lab’s agility and growing influence in the aerospace sector.

Neutron Rocket: A Game-Changer

Rocket Lab’s future ambitions hinge on the development of its Neutron rocket, a larger and more powerful launch vehicle that could rival SpaceX's capabilities. Announced alongside its November 12 earnings, a launch services agreement for Neutron with a confidential customer sent the stock soaring. Neutron is designed to carry payloads of up to 13 metric tons into low Earth orbit, a significant upgrade from the Electron’s 300-kilogram capacity.

Neutron’s development has fueled optimism among investors, with the first launch expected in late 2025. The rocket positions Rocket Lab as a viable competitor in heavy-lift launches, an area currently dominated by SpaceX. This strategic move expands Rocket Lab’s market reach and cements its role as a serious player in the commercial and defense aerospace industries.

Strong Financial Results and Growing Market Confidence

Rocket Lab’s recent earnings release was another key driver of its stock’s momentum. The company reported better-than-expected revenue of $105 million for the quarter and provided strong guidance for Q4. This financial performance and its Neutron announcement have significantly bolstered investor confidence.

Analyst sentiment has also improved dramatically. The company had only seven analyst ratings a year ago, with a consensus price target of $7.82. That number has grown to eleven today, with a consensus target of $16.50 and a Moderate Buy rating. High-profile firms like Goldman Sachs have initiated coverage, signaling increased institutional interest. Over the past year, institutional ownership has risen to nearly 72%, with net inflows of $56 million, reflecting growing confidence in Rocket Lab’s long-term potential.

Is RKLB a Buy on the Dip?

Rocket Lab’s remarkable 2024 run, up over 300% year-to-date, reflects its operational achievements and growing market optimism. However, with shares now pulling back, investors may be able to enter at a more favorable price. The company’s continued progress with Neutron, strong financial results, and increasing institutional interest point to a promising future.

While risks remain, such as execution challenges with Neutron and competition in the space industry, the long-term growth potential of the space sector, projected to reach $1 trillion by 2040, according to Morgan Stanley, makes Rocket Lab an intriguing play. For investors willing to navigate the volatility, RKLB’s current dip could offer a compelling entry point into the rapidly expanding space race.