Here's My Top Space Stock to Buy Right Now, And Why It's Better Than SpaceX
Key Points
Rocket Lab has $2.4 billion in launch backlogs, and its upcoming Neutron rocket could be a big step forward.
Much-larger rival SpaceX accelerated its capex spending by 554% to $18 billion in the second quarter.
Both stocks are risky, but Rocket Lab's capex spending is far lower because it isn't making big bets on AI.
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Investors trying to navigate the space industry have no doubt considered investing some of their money in Space Exploration Technologies (NASDAQ: SPCX).
And why wouldn't they? The company is one of the leading rocket launch companies, has a successful satellite internet business, a top artificial intelligence model, and just had a successful test launch of the largest rocket ever made.
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But SpaceX isn't without its issues. For one, it's gone on a massive spending spree to fuel its growth. And, frankly, some investors simply aren't enthusiastic about how Elon Musk runs his companies.
For those looking for an alternative space stock, here's why Rocket Lab (NASDAQ: RKLB) should be at the top of your list.
Image source: Getty Images.
Rocket Lab's future is about to take off
Rocket Lab already has a robust rocket launch business with its Electron rocket carrying payloads into orbit for customers. But its future will be built on its much larger Neutron rocket.
Neutron is a reusable medium-lift rocket capable of sending 28,000 lbs. into low Earth orbit, far more than Electron's 661-lb capacity. This means that Rocket Lab will soon be able to make far more money from its launches than it has previously.
I say "soon" because Neutron is still in the final stages of testing, and management recently said it plans to get Neutron to the launchpad before the end of the year. Neutron has already been delayed before, and management's focus on getting Neutron to the launchpad by the end of 2026, versus actually launching it, could mean Neutron isn't quite ready yet.
Still, Rocket Lab is making progress, and customers are already signing agreements specifically for Neutron launches. The company has at least seven Neutron-specific commercial launches in its backlog through 2029, and likely more through government defense launches.
One such government contract, worth $397 million, with the U.S. Space Force involves Neutron deploying new flat-panel satellite technology into orbit for the Space Force's Space-Based Airborne Moving Target Indicator (SB-AMTI) program.
What's more, Rocket Lab has 90 launch missions in its backlog for both Electron and Neutron, worth $2.36 billion. While it's not guaranteed revenue, it does show how interested Rocket Lab's customers are in its rocket technology and how successful the company could be once Neutron begins launching payloads.
Why Rocket Lab stock is better than SpaceX
Rocket Lab isn't profitable, but its revenue is growing. Sales rose by 62% in the second quarter (ended June 30) to $234 million. The company's losses also narrowed to $0.08 per share, an improvement from $0.13 per share in the year-ago quarter.
SpaceX is in a similar position, albeit at a much larger scale. The company's losses narrowed to $0.09 per share in the second quarter (ended June 30), which was far better than its $0.34 loss in the year-ago quarter. Revenue jumped 92% to $7.8 billion.
But the main reason Rocket Lab is a better space stock right now is that its spending is under control, while SpaceX's appears to be running wild.
Even as Rocket Lab is building and testing components of its Neutron rocket, the company's capital expenditures (capex) were just $26 million in the second quarter, down from $32 million in the year-ago quarter. That's in stark contrast to SpaceX's $18.3 billion in capex spending in the quarter, a 554% increase from the year-ago quarter.
That's a heck of a lot of spending, and most of it -- nearly $16 billion -- went toward the company's massive Colossus AI data center project. SpaceX will likely continue to spend heavily as it builds out its data centers, which could weigh on the company's earnings for years to come.
Rocket Lab has its risks, but the company is laser-focused on its rocket launch business and isn't burning through billions of dollars in capex. With Neutron on the cusp of launching, a surge in backloads of new contracts, and far less spending, I think Rocket Lab stock looks like the better buy right now.
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Chris Neiger 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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