Space company Rocket Lab USA Inc., which reported better-than-expected second-quarter results this week, is well positioned to tap growing demand for launches, says analyst firm Stifel.
“We contend [Rocket Lab] is one of the highest-quality space companies to enter the market,” Stifel analyst Erik Rasmussen wrote in a note released Wednesday. “Its dedicated small launch (Electron) rocket is critical to drive the industry higher, and we see it as a game changer, but also expect its medium launch rocket (Neutron) to help fill the void for smallsat constellation deployments.”
Rasmussen noted that Rocket Lab
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Speaking during a conference call to discuss Rocket Lab’s second-quarter results, CEO Peter Beck said the company will soon see its 40th Electron rocket launch and is on track to complete three more launches this quarter and 15 overall this year. The company touts its 59-foot-high Electron as “the only reusable orbital-class small rocket.”
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“Demand for launch remains elevated, and the manifest is building already into 2024 and 2025, while space systems will benefit once the MDA/Globalstar program moves into production,” Rasmussen wrote. Last year Rocket Lab was awarded a $143 million subcontract by Canadian space company MDA Ltd.
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Stifel maintained its buy rating for Rocket Lab. Of nine analysts surveyed by FactSet, seven have an overweight or buy rating and two have a hold rating for Rocket Lab.
The company’s stock fell 0.8% Wednesday, outpacing the S&P 500’s SPX decline of 0.3%. Rocket Lab shares are up 75.2% in 2023, compared with the S&P 500’s gain of 16.8%.
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Justus Parmar, CEO of Fortuna Investments, a venture-capital and advisory company currently focused on space investments, also expects Rocket Lab to receive a boost from its forthcoming Neutron rocket. “The $50 million price tag for a commercial launch on the company’s Neutron Rocket will be a game changer for the company’s revenue profile, as compared to launches in the $8 million-range last year,” he wrote.
The 141-foot-high Neutron rocket is designed for the deployment of “mega constellations” of satellites, deep-space missions and human spaceflight, according to Rocket Lab.
During the conference call to discuss the second-quarter results, Beck said the company is making “steady progress” toward an anticipated launch of the Neutron rocket at the end of 2024.
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Earlier this year, Rocket Lab acquired bankrupt satellite-launch company Virgin Orbit Holdings Inc.’s 144,000-square-foot aerospace production and manufacturing facility in Long Beach, Calif., for $16.1 million. The “purchase agreement also included the sale of certain launch vehicle production machinery and equipment, which will help advance the production of Rocket Lab’s Neutron rocket,” Rasmussen wrote. “This transaction will help drive a reduction in capex for Neutron and by acquiring the assets through an auction process, Rocket Lab is gaining a high quality manufacturing facility at a price well below the prevailing market value (believed to be north of $100M).”
Fortuna Investments’ Parmar believes that Rocket Lab’s strong performance also bodes well for SpaceX, helping Elon Musk’s private space company avoid any appearance of a monopoly. “As Rocket Lab continues its trend of successful commercial launches, it is becoming well-positioned to counter SpaceX’s effective monopoly in the commercial launch market (over 80% of U.S. and 69% of global launches),” he said in a statement. “This is welcome competition for Elon Musk and a necessity for the growth of a healthy space industry.”
