Down More Than 50% From Its High, Is Rocket Lab Stock a Good Buy Right Now?
Key Points
Shares of Rocket Lab have been in a tailspin since June, around the time SpaceX went public.
Rocket Lab has become a top space stock, achieving nearly $770 million in revenue over the past year.
The market may be bearish on the stock due to delays relating to its larger Neutron rocket.
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Much of the excitement around space travel has centered on Space Exploration Technologies Corp of late. The company, more commonly referred to as just SpaceX, went public earlier this year, and with CEO Elon Musk running the business, it has garnered a lot of hype and excitement.
In the midst of this, another top space stock has been falling -- Rocket Lab (NASDAQ:RKLB). This once-hot growth stock has suddenly fallen out of favor with investors. Its decline, coincidentally, also began right around June, when SpaceX went public.
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Now down more than 50% from its 52-week high of $151, has Rocket Lab stock become a no-brainer buy right now?
Image source: Getty Images.
Rocket Lab's struggles go deeper than just SpaceX
Although SpaceX has certainly played a role in diverting more investment dollars to its business rather than other space stocks, that isn't the only reason why Rocket Lab's stock has been struggling this year. Investors and analysts have been eagerly awaiting the launch of its larger Neutron rocket, which can transport 13,000 kg into low Earth orbit. It's a huge opportunity for the company to generate more revenue and potentially drastically improve its margins along the way. It hasn't happened yet, and delays may have frustrated investors.
Thus far, it has been the company's smaller Electron rocket that has been driving its growth. Rocket Lab has completed 97 successful launches involving Electron. But with a payload capacity of up to 300 kg that it can send into low Earth orbit, it's far smaller than Neutron.
The company has generated nearly $770 million in revenue over the trailing 12 months, but it has also incurred losses totaling more than $165 million. Larger payloads and improved margins could go a long way in putting Rocket Lab on a path to profitability. A successful Neutron launch, which was expected later this year and may now not happen, is what the market has been anticipating. If it does happen, however, that could be the spark the stock needs to rally again.
Why Rocket Lab stock may be worth the risk
Shares of Rocket Lab are up just 6% this year, and if it were to return to its 52-week high, they would double from current levels. In the long run, there may be much more significant upside for the business. While delays in the launch of Neutron may have dismayed investors, that certainly doesn't undermine the bull case for investing in Rocket Lab stock.
For patient investors who are willing to take on some risk and hang on for the long haul, now may be an opportune time to buy this beaten-down stock.
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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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