Should you buy Rocket Lab stock?

Bullish Studio

Rocket Lab stock analysis. RKLB stock. Join our newsletter: https://www.overlookedalpha.com  Rocket Lab stock is down roughly 44% since it went public.   Today, the company has a market cap of 2.7 billion dollars. With 446 million of cash and 100 million of debt, the enterprise value is 2.3 billion.  Rocket lab makes money in two main ways. It launches small satellites into orbit for multinational companies and organizations. And its space systems division designs and manufactures satellites and spacecraft components. The company also provides orbit management, so Rocket Lab does a bit of everything.   Rocket Lab has launched over 30 rockets and 150 satellites but it’s the space systems division that contributes the most amount of revenue - around 65% of the total.  And companies choose to launch satellites for a number of reasons; communication, defense, navigation, research and more. The launch market is expected to reach 35 billion by 2030 while the overall space market could hit over a trillion.  What makes Rocket Lab unique is its focus on smaller payloads. To launch one of its Elektron rockets costs just 6 million dollars. Compare that with Spacex’s Falcon 9 which takes larger payloads and costs around 62 million dollars per launch.  That’s helped Rocket Lab generate 225 million in revenue over the past 12 months which is an increase of almost 350% over 4 years.   #rklbstock #stocks #investing #stockstowatch

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00:00 Rocket Lab's stock is down roughly 44% since it went public. Today the company has a market

00:05 cap of $2.7 billion. With $446 million of cash and $100 million of debt, the enterprise

00:12 value is $2.3 billion.

00:14 Rocket Lab makes money in two main ways. It launches small satellites into orbit for multinational

00:19 companies and organisations. And its Space Systems Division designs and manufactures satellites

00:25 and spacecraft components. The company also provides orbit management, so Rocket Lab does

00:30 a bit of everything.

00:32 Rocket Lab has launched over 30 rockets and 150 satellites, but it's the Space Systems

00:36 Division that contributes the most amount of revenue, around 65% of the total. And companies

00:42 choose to build and launch satellites for a number of reasons. Communication, defence,

00:47 navigation, research and more. The launch market is expected to reach $35 billion by

00:52 2030, while the overall space market could hit over a trillion.

00:56 What makes Rocket Lab unique is its focus on smaller payloads. To launch one of its

01:00 Electron rockets costs just $6 million. Compare that with SpaceX's Falcon 9 which takes

01:06 larger payloads and costs around $62 million per launch.

01:10 That's helped Rocket Lab generate $225 million in revenue over the past 12 months, which

01:15 is an increase of almost 350% over 4 years. However, $110 million of revenue in 2022 came

01:23 from acquisitions. Strip that out and organic growth is more like 140% or an average of

01:29 about 35% annually.

01:31 And the business of space is capital intensive. Rocket Lab has gross margins under 10% and

01:36 the company reported a loss of $155 million over the past 12 months.

01:41 With cash and investments under $500 million, it wouldn't be a surprise to see the company

01:45 raise more cash in the not too distant future.

01:48 That said, Rocket Lab is making good progress. It now has a launch turnaround time of just

01:52 7 days. It's working on hypersonic testing and it hopes to launch a new reusable rocket

01:57 next year called Neutron. That rocket should carry larger payloads and generate more revenue

02:02 per launch. Of course, rocket launches will remain a tricky business and there have already

02:06 been some notable bankruptcies such as Virgin Orbit.

02:10 And while the outlook for launches is good, there are question marks over their environmental

02:14 impact. Because rockets release black soot higher up in the stratosphere, their impact

02:19 on climate could be significant.

02:21 Rocket Lab looks like an impressive company. Its rockets are in strong demand and its space

02:25 systems division provides a more stable and profitable source of revenue. But it's difficult

02:30 to calculate the return to shareholders.

02:32 If you assume Rocket Lab grows revenue at 25% per year for the next 10 years, then operates

02:37 with a 5% net income margin, the company would be making net income of only $100 million

02:42 in 10 years time. A 25 times multiple on that puts the market cap at $2.5 billion which

02:48 is close to the current valuation.

02:50 That's probably too pessimistic and the stock will surely benefit if Neutron is a success.

02:55 But for now I'm giving the stock a neutral rating. But these are my personal opinions

02:58 not financial advice. I've got no position in the stock. For more detailed investing

03:03 ideas visit our website at overlookedalpha.com

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