Why Rocket Lab Stock Just Popped

Rocket Lab (NASDAQ: RKLB) stock jumped sharply in afternoon trading Wednesday, gaining 8.9% through 2 p.m. ET after announcing the return to Earth of a Rocket Lab Pioneer spacecraft it built for Varda Space Industries.

Image source: Rocket Lab.

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What Rocket Lab said

For the second time in two months, said Rocket Lab, it has supported a Varda mission using Electron rockets and Pioneer spacecraft to loft W-3 space capsules from Varda into Earth orbit, then return them to the ground successfully.

Privately held California space company Varda is described as a "leading orbital pharmaceuticals and hypersonic reentry logistics company." It has hired Rocket Lab to run a series of four to-orbit-and-back missions, of which the one that wrapped up early this morning was the third (total, and second this year).

It's not entirely clear what Varda is doing up there on these missions, but presumably the company is conducting experiments related to drug development in near-zero gravity.

Is Rocket Lab stock a buy?

It's also not entirely clear how much Varda is paying Rocket Lab for its assistance. But at an average launch cost of $8.5 million per Electron launch, plus the cost of the Pioneer spacecraft, plus assistance with recovery of the W-series space capsules, the four missions Varda contracted probably make up a significant percentage of Rocket Lab's now-$466 million in annual revenue.

While I'm not convinced today's press release is worth a nearly 9% bump to Rocket Lab's stock price, the continued success of the company's relationship with Varda is certainly valuable. The longer it lasts and the more missions Varda runs with Rocket Lab, the better it will be for Rocket Lab stock.

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Rich Smith has positions in Rocket Lab USA. The Motley Fool recommends Rocket Lab USA. The Motley Fool has a disclosure policy.