Stock in commercial satellite and space launch services company
Rocket Lab USA
picked up another bullish rating from Wall Street. Shares are rising as a result.
Thursday, Stifel analyst Erik Rasmussen launched coverage of Rocket Lab (ticker: RLKB), rating it a Buy and setting his price target at $22 a share.
The stock is up 6.8%, at $15.66, in recent trading. The
has gained 0.2%, and the
Dow Jones Industrial Average
is down 0.1%.
“The small satellite market has exploded, and Rocket Lab has established a leading position,” wrote Rasmussen. Falling costs and the miniaturization of electrics has enable space start-up companies to build satellites for a fraction of what it cost in the past. That is enabling a host of new applications such as earth imaging and SpaceX’s high-speed, space-based internet.
Rocket Lab can build satellites, and it can also deliver them to space with its low-cost, reusable rockets.
With its current product portfolio, Rocket Lab’s total addressable market for launch and satellite services is about $30 billion, according to Rasmussen. He expects the company to add capabilities and services over time as the commercial space industry grows and projects Rocket Lab sales will grow to about $1.6 billion by 2027 from roughly $50 million in 2021.
By 2027, the analyst projects Rocket Lab will be generating about $500 million in Ebitda, or earnings before interest, taxes, depreciation, and amortization. Rocket Lab’s market capitalization, for context, is about $7.6 billion, based on 483 million fully diluted shares outstanding.
Rasmussen is the fourth analyst to launch coverage of the stock, according to Bloomberg. Rocket Lab completed its special purpose acquisitions company merger in August, making it a publicly traded company, and Wall Street is still ramping up research. A company the value of Rocket Lab will typically end up with about 10 analysts covering its stock.
Of the four analysts that cover the stock now, three rate shares Buy for a Buy-rating ratio of 75%. The average Buy-rating ratio for small-capitalization stocks is between 60% and 65%. The average analyst price target for Rocket Lab stock is $22, up about 50% from recent levels.
That’s an attractive return, but Rocket Lab is new and sales, relative to its market value, are small. Wall Street appears to want a margin of safety when buying the stock.
Barron’s recently wrote positively about Rocket Lab shares, saying it was an attractive small-cap pick to play the new commercial space race.
Write to Al Root at [email protected]