The was a time when the key players in space exploration were all government-run operations, but over the past few decades, privately run projects like SpaceX and Blue Origin have become a bigger part of the picture. Investors looking to get in on the action may wish they could buy into Elon Musk's SpaceX, but that company doesn't plan on making a public stock debut anytime soon.
One space company that you can invest in is Rocket Lab USA(NASDAQ: RKLB). Its stock has surged by 186% since falling to its all-time low in mid-April.
Rocket Lab conducts the second-most space launches in the U.S., and it's continuing to ramp up the pace. The company projects that it will conduct 15 to 18 launches this year, roughly twice as many as it conducted in 2023, and it has a robust backlog. And it has something even more important in the works.
Rocket Lab USA looks to gain market share
The private sector is steadily expanding its influence in the extraterrestrial arena. Companies are working on exciting projects such as deploying satellite networks to provide cellular broadband service and sending rovers to the moon for research. These companies all need a hand in getting their technologies into space, which is where Rocket Lab comes in.
Rocket Lab's flagship launch vehicle is the Electron, and it is the second-most used orbital rocket in the U.S., trailing SpaceX's Falcon. Last year, SpaceX's 98 launches accounted for 90% of the launches conducted by U.S.-based companies. But Rocket Lab is making strides in its efforts to catch up. It conducted nine launches last year and is on track for nearly twice as many by the end of this year.
The drawback of Rocket Lab's Electron launch vehicle is that its maximum carrying capacity is around 250 kilograms. This puts it at a distinct disadvantage to SpaceX, whose Falcon launch vehicle can carry up to 100 times that amount. A smaller rocket means smaller margins on each launch. It also limits the types of payloads that the Electron can launch.
Here's what can you expect over the next year for Rocket Lab
Right now, Rocket Lab is unable to handle many larger civil and defense payloads. That's where its Neutron rocket will come in. Rocket Lab has been working on this larger launch vehicle since 2021. Its payload capacity is expected to be 15,000 kilograms, which will give Rocket Lab the ability to take on much larger contracts.
CFO Adam Spice said in May that the company expects the first launch of its Neutron rocket to be "no earlier than mid-2025." This larger rocket will be vital in helping it achieve better profit margins and will put it on track to break even next year, according to the company.
Image source: Rocket Lab USA.
In August, it test-fired its Archimedes engine -- the type that the Neutron rocket will use -- for the first time at NASA's Stennis Space Center in Mississippi. CEO Peter Beck said those tests kept it on track to launch by mid-2025.
Analysts covering Rocket Lab project the company will have revenue of $596 million in 2025 -- 40% more than this year's projected revenue. They also project the company will go from losing $188 million this year to losing $124 million next year, and forecast it could be close to turning profitable in 2026.
Is Rocket Lab right for you?
Rocket Lab is a growing young company, but its stock is vulnerable to wide price swings and is risky to own. Because customer readiness in its business can be hard to predict, it will have difficulty predicting the exact number of launches it will conduct in a given year. Given the volatile nature of the stock, it isn't an ideal holding for conservative investors.
However, if you have some tolerance for risk, today could be a good time to start building a position in the stock. The company's progress continues, and it remains on track for the mid-2025 debut launch of its Neutron vehicle. Its robust backlog of over $1 billion shows strong demand for its services.
If the stock interests you, you'll want to keep a close eye on the development of its Neutron vehicle, as setbacks on that front could push back the timeline for Rocket Lab to reach profitability. Therefore, a good strategy could be to open a small position in it today and add to it over time as the company progresses toward achieving positive cash flow.
Should you invest $1,000 in Rocket Lab USA right now?
Before you buy stock in Rocket Lab USA, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Rocket Lab USA wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $806,459!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 14, 2024
Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool recommends Rocket Lab USA. The Motley Fool has a disclosure policy.
