Should You Buy Rocket Lab Stock While It's Under $90?
Key Points
Analysts project the stock could rise above $110 in the near term.
A successful launch of Neutron could instantly make Rocket Lab a much hotter stock.
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One of the most promising stocks in the space sector these days is Rocket Lab (NASDAQ: RKLB). The company has been generating some solid growth in recent quarters, and its prospects for profitability may improve significantly once its larger Neutron market starts carrying larger payloads for the company and unlocks more growth opportunities.
While the stock has been doing well over the past year, achieving gains of more than 85%, it's also down significantly from the highs of more than $150 that it reached back in May. Is Rocket Lab a good growth stock to buy while it trades below $90?
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The stock has significant upside
The consensus analyst price target for Rocket Lab stock is just under $111. For it to reach that level, it would need to rise by around 34% from where it trades right now, at about $83. If, however, the company has a successful launch of its larger Neutron rocket later this year, that may result in more upgrades from analysts and more bullishness around this space stock.
Rocket Lab has been planning a Neutron launch in the fourth quarter of this year, but it may not happen until next year. Investors have been waiting years for the launch, as Neutron was first announced in 2021 with plans to launch in 2024. But with a lot riding on it, the company is ensuring that it goes well. "Our focus is on the bigger picture and making sure that when Neutron flies, it enters service as a system ready for full-scale production and high cadence launch," said the company's CEO, Peter Beck, on its recent earnings call.
Is Rocket Lab's stock worth buying right now?
Rocket Lab has exciting growth prospects ahead, as growing interest in space travel may open up many opportunities for the business. But there is also risk to consider, given how capital-intensive the business is; the company's gross profit margins are expected to be around 30% for the current quarter, which can make it difficult for it to stay out of the red. And even on an adjusted EBITDA basis, the company still expects to incur a loss of at least $17 million for the current period.
For long-term investors willing to be patient, however, Rocket Lab stock may be an intriguing buy. And if it's able to return to its previous highs or simply achieves the near-term upside analysts expect, it could generate terrific returns.
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David Jagielski, CPA 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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