Why Firefly Aerospace Stock Is Down Today

Key Points

• Firefly's Alpha rocket experienced a setback on a testbed, its second incident in recent months.

• The company's stock has been volatile during its short time on public markets. Investors should expect that volatility to continue.

• 10 stocks we like better than Firefly Aerospace ›

Newly public Firefly Aerospace (NASDAQ: FLY) experienced a setback in a test of its Alpha rocket, its second failure in recent months.

Investors are concerned about what the failures will do to Firefly's timeline for commercial service, causing Firefly shares to trade down 22% as of 9:50 Eastern.

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Image source: Getty Images.

A failed test causes new problems

Firefly launched its initial public offering in August and quickly rocketed higher, reflecting investor excitement about space stocks and for Firefly in particular. Firefly has been around for a while and has successfully put a lander on the moon, but the company's financial history is marred by setbacks.

Late Monday, Firefly said that the booster stage of its Alpha rocket "experienced an event that resulted in a loss of the stage" during a preflight trial. Firefly also had a failure during an April test launch, when the booster separated from the upper stage.

The booster that was lost was supposed to power Alpha's first mission since the April failed launch. Firefly said, "we will share more information on the path forward at a later date," implying that the launch schedule could be at risk.

If Firefly stock a buy?

There is demand for a rocket in Alpha's range, smaller than SpaceX's Falcon 9 but larger than Rocket Lab's Electron mainstay. But competition is intense and growing, and any delays to Alpha make it that much harder for Alpha to break through.

The company has taken public investors on a wild ride during its short time as a public company, trading as high as $73.80 per share down to new lows in the $27.60 range today. Yet even at the lows, Firefly is still priced at a speculative valuation and doesn't offer much of a discount relative to the much more established Rocket Lab.

Investor excitement in the new space race is understandable, and there are likely big future winners launching onto public markets right now. But until Firefly can reliably get its Alpha rocket off the ground, investors should remain cautious about buying in.

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Lou Whiteman has positions in Rocket Lab. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.