Like many investors, I have a Stocks and Shares ISA watchlist. This is a dozen-or-so stocks I’m keeping close tabs on because I may be interested in buying them at a lower price.
One that’s been collecting cobwebs on my list for ages is Rocket Lab (NASDAQ:RKLB). In this time, it surged almost 500%, triggering a fair amount of FOMO (fear of missing out). Yet, I resisted the urge to push the buy button.
That restraint has proved justified. Because since reaching a peak of $151 in May, Rocket Lab stock has crashed 59% to $62. At this marked-down price, I’m tempted to have a nibble.
But after such a brutal summer sell-off, why not make it a feast?
A brief introduction
For those unfamiliar, Rocket Lab’s probably best thought of as a mini-SpaceX. Both are vertically integrated (they design and build engines and rockets in-house), with their own launch facilities.
Last year, Rocket Lab did 21 missions with its Electron and HASTE rockets, with a 100% success rate. In September, the firm successfully launched its 94th Electron mission, deploying an Earth-imaging satellite for Synspective (the Japanese space technology firm).
The company’s testing a larger rocket, Neutron, which it hopes will compete with SpaceX’s Falcon 9 for lucrative contracts to carry bigger payloads. Similar to Falcon 9, Neutron’s designed to be partly reusable.
Unlike SpaceX, Rocket Lab sells components such as spacecraft, satellite hardware and solar panels to anyone who needs them.
Rocket Lab’s also acquiring satellite communications firm Iridium Communications for $8bn. If approved, it says the deal will create a “vertically-integrated space company that designs, builds, launches, and operates its own constellations, delivering critical communications capability to millions of users worldwide“.
To me, that sounds like a plan to build a mini-Starlink (SpaceX’s most profitable division by far today).
How fast is growth?
Of course, any SpaceX-type company worth its salt needs to be growing rapidly. How does Rocket Lab measure up in this respect? Last year, revenue jumped 38% to $602m, while its backlog of work surged 73% to a record $1.85bn. In Q2 of this year, revenue rocketed 62% to $234m and the backlog grew to $2.36bn.
Looking ahead, Wall Street sees the top line expanding to almost $2bn by 2028. Crucially, that’s when analysts expect the company to turn profitable for the first time.
Why not nibble rather than feast?
The reason I’m taking a cautious stance is twofold. One, the launch timeline for Neutron’s maiden test keeps getting pushed further out, from 2024 originally to late 2026, and now possibly 2027.
This issue has been putting pressure on the share price. So with investor uncertainty lingering, I think there’s a chance I could invest at an even lower price in the coming months.
Second, this isn’t a cheap stock, even after nosediving. It’s trading at 39 times forecast sales for 2026, and there’s no profits yet, as mentioned.
Yet the innovative firm has enormous long-term potential. And through a German subsidiary, it’s expanding into Europe, where governments are keen to reduce their reliance on SpaceX for satellite launches.
If investors want exposure to the booming global space market, Rocket Lab’s worth checking out. But it’s not one I’m looking to pile into just yet.
Should you invest £5,000 in Rocket Lab right now?
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Ben McPoland own shares in SpaceX.
