Rocket Lab Stock Keeps Dropping. Here's Exactly When I'd Buy The Dip.
Key Points
Rocket Lab's share price has been more than halved in less than three months.
The pullback doesn't necessarily reflect a major change in the company's prospects.
Even if we're not at the exact bottom right now, there's apt to be more upside than downside from here.
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Just when it looks like the sell-off can't get any worse, it gets worse. Shares of Rocket Lab (NASDAQ: RKLB) are now down more than 50% from their late-May peak, recently reaching a new multi-week low.
Experienced investors know the sell-off will end sooner or later, making this pullback a buying opportunity. The question is, when should they dive in? I'd suggest right now.
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Meet Rocket Lab
That's admittedly easier said than done, given the persistence of this pullback.
This isn't your typical stock-picking scenario, though. This is a growth stock of a company with only a modest present, but a very promising future.
Namely, while its well-proven reusable Electron rocket has successfully deployed over 260 small satellites over 91 launches, its bigger Neutron rocket is expected to begin regular flights late this year or early next year. This puts the company in the so-called -- and biggest -- "medium lift" sliver of the space-launch business that Precedence Research expects to annually grow nearly 12% through 2035, when it will be worth more than $70 billion per year.
Image source: Getty Images.
Launch services aren't all that Rocket Lab offers, either. It's not even its biggest business, in fact. With its impending acquisition of satellite communications specialist Iridium Communications, the company will be able to help customers build higher-functioning satellites as well.
Precedence expects the satellite communications market itself to grow from less than $109 billion last year to over $260 billion in 2034. For its part, analysts expect Rocket Lab to report top-line growth of more than 50% this year, and nearly 40% next year.
Play the proven pattern
And this raises the question: If the tailwind is so strong, why is the stock falling?
The market environment and industry backdrop always have an impact on any stock's price at any given time. But perhaps never as much as they do on space-related stocks right now. For example, the recent initial public offering (IPO) of Space Exploration Technologies (you know it better as SpaceX) drew attention to all of the space industry's publicly traded companies. As could have been expected, though, SpaceX's post-IPO pullback is now dragging its peers down with it.
Rocket Lab stock's recent volatility isn't exactly new. It's been back and forth quite a bit since early last year, with the ebb and flow you would expect from a relatively young and still-unprofitable company.
Just recognize that this back-and-forth action has developed a discernable pattern. Namely, each dip has stopped short of a prior low, with each pullback eventually leading to a higher high reflective of the company's march toward profitability.
Worth the wild ride
And the shares could move even lower before moving higher again. So even if we are at a bottom, continued volatility remains in the cards no matter what.
Nonetheless, this stock has rewarded investors bold enough to buy on a deep dip. The company's business is growing, tilting the stock's overall momentum upward.
This might help: Analysts' current consensus price target for Rocket Lab is $116.24, or 85% above the present price. Just be sure to buckle up for a bumpy ride if you're getting on board here.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.
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