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What’s Next after Recent Swings By TipRanks


© Reuters. Rocket Lab USA: What’s Next after Recent Swings

One could say Rocket Lab USA (RKLB) stock lived up to its name earlier this month. In just a few days, the shares of this space-launch and satellite manufacturing firm saw their stock rise from $10 to $21.34 per share.

What’s the reason for this? It is due to solid quarterly results as well as news of a large contract win. Following both positive developments however, investors have decided to “sell on the news.”

As a result, the stock has dipped back to around $15.50 per share. Is it now time to purchase after the stock’s pullback? (See RKLB stock charts on TipRanks)

I’m staying bearish until it moves back to lower price levels.

Analysts, Investors Excited about RKLB Stock

Even with recent profit-taking, retail excitement remains elevated with Rocket Lab USA shares. That’s clear from the high level of discussion about it on platforms like Reddit’s r/WallStreetBets.

Make no mistake however, there’s more on the side of RKLB stock than just “meme stock” popularity. It has also been enthusiastically received by the sell side. For example, Edison Yu of Deutsche Bank (DE:) recently gave shares a Buy rating, and a $18 price target.

His bullishness is based on this: Yu sees it as the “highest quality” name among the space stocks that have recently gone public.

The other analyst to give it a Buy rating, Canaccord’s Austin Moeller, is even more bullish. Giving it a $30 per share price target, Moeller believes it’s second only to Elon Musk’s SpaceX among commercial space launch operators.

However, despite its bullishness, it may be a bad idea to buy in right now. This is due to the possibility that shares will fall even more in price before reaching recent highs or beyond.

Reasons for Concern

RKLB stock may have a lot in its corner long-term. But two near-term factors may mean more declines lie ahead. 

The first is the expiration of the lockup. Yu also mentioned this concern in his research paper. Private investors may release details of the sale plans for this ex-SPAC (special purpose acquire company). Investors might react negatively and send shares down even before the lockup expires.

Second, the stock’s premium valuation. Its 2021 projected revenue of between $50 million and $54 million hardly justifies this stock’s current trading levels.

It’s understandable why investors would pay for such high-growth projections, as they are clearly laid out in the investor presentation. Its top line could rise more than 29 times in the next six-years, from $1.57 billion to $1.57 million due to demand growth for its satellite and launch businesses.

But that might not be enough to overcome factors like Federal Reserve tapering or possible interest rate rises. This could make growth stocks less attractive in the months ahead.

Shares could fall to the SPAC offer price of $10 per share if there is any downward pressure. Or perhaps, even lower.

What Analysts are Saying about RKLB Stock

According to TipRanks, RKLB stock has a consensus rating of Moderate Buy. Two analysts rate RKLB stock a Buy and one analyst gives it a Hold.

The average RKLB price target is $22 per share, implying 48.6% upside from today’s prices. The price targets of analysts range from $18 to $30 per share.

Bottom Line

Until SpaceX goes public, Rocket Lab USA may be one of the best options for investors looking for exposure to the fast-growing space sector.

However, as investors take profits, worries continue to build about upcoming insider sales and the possible downturn in growth stocks.

It may be a better idea for investors to just wait and see if RKLB stock continues to fall back down to earth.

Disclosure: Thomas Niel didn’t hold any positions in the securities discussed in this article at the time it was published.

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