![]() Some people are worried about fierce competition from SpaceX but it isn’t really a direct competitor. Therefore the company is now developing a new rocket called the Neutron, which has an 8-ton payload capacity compared to Electron's 300 kg. Rocket Lab has successfully developed the Electron but its capacity is highly constrained due to its size, which limits the opportunity. The strong results from the two segments provide the company with a strong foundation regardless of the success of Neutron. $12 million is contributed by launch services while $39.8 million is contributed by Space System. In the latest quarter, the company recorded revenue of $51.8 million, up 88% YoY (year over year). These two segments are now already generating meaningful revenue with superb growth. This segment is also very important for financial purposes, as it contributes 77% of revenue, which provides much-needed stability to offset the volatility in the launch segment. According to the company, over 30% of global space launches now feature their technologies. The segment provides critical hardware and software for Space-related products, including NASA’s James Webb telescope. While investors may not notice, the company also owns a compelling space system segment that is formed by combining in-house technologies with multiple acquisitions such as SolAero and Planetary Systems. It is also much cheaper and has a much higher launch cadence, therefore its value proposition should remain attractive. While the market opportunities are smaller compared to Neutron due to capacity limitations, it should still be extremely useful for lightweight lifts. ![]() I believe Electron has now established a clear leading position in the small launch market. What’s more impressive is that Electron has a 100% mission success rate since the company went public. It also successfully caught the Electron using the helicopter and launched an Electron with pre-flown components, which are huge steps towards fully reusable rockets. Electron continues to see solid progress with 32 total launches recorded to date, including NASA's notable CAPSTONE mission to the moon last year. Rocket Lab has been seeing strong momentum with Electron and its Space Systems segment. I believe the company should be well-positioned to benefit from the market expansion. For instance, Citigroup ( C) said that the overall space industry could reach $1 trillion in revenue by 2040, as lower launch costs unlock new use cases and opportunities. ![]() A lot of space applications also rely on launch services. The demand from the commercial side is also growing, as the number of satellite launches from customers such as Planet Labs ( PL) continues to rise. The market expansion is driven by the ongoing increases in the government’s budget for space, most notably NASA. While Fortune Business Insights estimates the market will grow at a CAGR (compounded annual growth rate) of 12.3% and reach $31.9 billion in 2029. According to the company, the TAM (total addressable market) of launch services is estimated to be $20 billion while the TAM of Space Systems is estimated to be $44 billion. Rocket Lab's market opportunities are huge. Its current clients include NASA, the US government, and commercial companies such as BlackSky Technology ( BKSY) and Globalstar ( GSAT). The company provides launch services through its Electron rocket and other space services such as satellite design and spacecraft manufacturing. Rocket Lab is a US-based space company founded in 2006 by Peter Beck. I like the risk-to-reward at the current price level therefore I rate RKLB stock as a buy. Even though it is still burning cash, it has ample liquidity and should not have to raise capital anytime soon. If everything goes according to plan, it will be a major growth driver that generates a significant amount of revenue. The real opportunity lies within Neutron, a much larger rocket that is aiming to make its debut in 2024. Rocket Lab is already seeing great success with its Electron rocket and Space System segment but this is just the start. I believe the drop offers a great buying opportunity for “risk-tolerant” investors as the company is pursuing a massive market. However, the company has dropped over 60% since going public in 2021 as the market sentiment hasn't been favouring growth stocks. Rocket Lab ( NASDAQ: RKLB) is one of the most interesting and exciting SPAC companies that went public. ![]() NicoElNino/iStock via Getty Images Investment Thesis
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