Why Rocket Lab Stock Dropped Today
Key Points
Cantor Fitzgerald reiterated a buy rating on Rocket Lab yesterday.
Cantor sees multiple moats protecting Rocket Lab, but still thinks the stock is worth only $96.
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Rocket Lab (NASDAQ: RKLB) closed Monday higher, but it didn't last. Shares of the small rocket maker tumbled 11% through 10:45 a.m. ET this morning despite encouraging words from Cantor Fitzgerald, which reiterated its "overweight" rating on the rocket stock in a mid-morning note yesterday.
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Why Cantor loves Rocket Lab
Cantor's note was curious. On the one hand, the Wall Street analyst spent most of its time singing Rocket Lab's praises: Rocket Lab just reported its highest-ever revenue quarter. The rocket company has launched 87 rockets successfully, more than any other American company not named SpaceX (or OK, ULA). Rocket Lab plans to launch 27 more rockets this year alone, including commercial Electrons, military "HASTE" rockets, and even a Neutron or two.
Speaking of which, this may be the biggest "material catalyst" for the stock, says Cantor. Rocket Lab's first reusable Neutron rocket is on track to launch later this year, and with each Neutron launch bringing in anywhere from $44 million to $50 million in revenue, this could soon be an even bigger franchise for Rocket Lab than Electron already is.
So why aren't investors more excited?
What's the matter with Rocket Lab stock?
Actually, the problem may be that investors are already too excited about Rocket Lab, whose stock has gained 61% over the past two weeks. And yet, after praising Rocket Lab to the moon and back yesterday, how much did the analyst say it thinks Rocket Lab stock is worth?
$96 a share, according to a note from StreetInsider.com -- versus a stock price of $118 today.
All of a sudden, it becomes clear now why investors are upset with Rocket Lab stock: Even according to one of its biggest fans, Cantor Fitzgerald, Rocket Lab stock costs too much.
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Rich Smith has positions in Rocket Lab. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.
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