Why Space Stock Rocket Lab Soared Today

Source Motley_fool

Rocket Lab (NASDAQ: RKLB) stock jumped 5.5% Monday afternoon on no obviously good news -- at least nothing specific to Rocket Lab. Despite the lack of news, The Fly is reporting "bullish flow" in the space stock, with call options buying outweighing put options purchases by nearly 5 to 1.

So what's going on with Rocket Lab stock today?

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Rocket with dollar sign payload launches to the moon.

Image source: Getty Images.

Trump vs. Musk

Most likely, the reason Rocket Lab is performing so well today is that another space stock is getting into some trouble. Over in Washington, D.C., you see, President Donald Trump and (ex-?) close advisor Elon Musk had a falling out last week, leading to the president threatening to "terminate Elon's governmental subsidies and contracts."

And the seeming implication of this statement is that billions of dollars of government contracts hiring Musk's SpaceX to ferry astronauts and supplies to the International Space Station, to operate Starlink satellites for the Pentagon, and to build human landing systems for the moon, could now be up for grabs.

Was the president's post on social media site Truth Social just bluster, or something more serious? No one knows for sure, but just the chance that billions of dollars of space work might open up to new bidders seems to be making Rocket Lab stock more valuable today.

Is Rocket Lab stock a buy?

Still, a few words of caution are in order. On the one hand, the chance that Rocket Lab might steal some space contracts from SpaceX does seem a reasonable reason to bid up shares of Rocket Lab stock, but this is speculative. On the other hand, Rocket Lab's very expensive valuation is a present-day, verifiable fact.

Lacking profits and trading for a heady 31 times sales valuation, I'd be cautious about buying more Rocket Lab stock until the price comes down a bit.

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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.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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