RocketLab: Still A Buy, Despite These 2 Key Risks

2025-01-27 10:17:21 ET

Summary

• RKLB has delivered exceptional returns - of more than 540% in the last year - driven by revenue growth, backlog expansion, and strong execution.
• Despite the bullish momentum, risks like the valuation (at 42x sales) and potential dilution are mounting, requiring an 'eyes wide open' approach for investors.
• RKLB's long-term opportunity remains compelling, with a material chance of achieving a business model similar to SpaceX's Starlink.
• The risk-reward profile remains attractive, and we're re-iterating our 'Buy' rating on RKLB.

It's been quite a while since we've written about RocketLab ( RKLB ).

When we first mentioned the stock about a year ago, we rated shares a 'Strong Buy' on the back of the firm's growing backlog, continued success on the launch front, and the 'call option' of Neutron and the Space Systems units, which were moving in a positive direction.

Realistically, at that point, RKLB seemed like the best way to invest in a company with a similar potential trajectory to SpaceX ( SPACE ) which, to this day, remains privately held....

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