Over the last several years, entrepreneurs Elon Musk and Jeff Bezos have brought a lot of attention to private space exploration. Partly due to Musk’s SpaceX and Bezos’ Blue Origin, investors have become increasingly enamored by the prospects of the business of space.
However, investing in SpaceX or Blue Origin isn’t so easy since both companies are privately held.
Are You Missing The Morning Scoop? Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
While Boeing or Lockheed Martin could suffice as logical alternatives to investing in SpaceX or Blue Origin, space enthusiasts seem to have found their preferred opportunity in a much smaller enterprise called Rocket Lab USA (NASDAQ: RKLB).
Let’s explore the prospects of investing in Rocket Lab and assess if this budding space stock could be a millionaire maker.
Rocket Lab recently reported financial results for the third quarter, and on the surface the company appears to be on an impressive trajectory.
The company has made notable progress in its core Electron vehicle launch initiatives, having completed a record 12 launches so far this year. Moreover, as of the end of the third quarter (Sept. 30), Rocket Lab held over $1 billion in backlog — representing an increase of 80% year over year.
The trends explored above suggest that demand for Rocket Lab’s services is on the rise. On the surface, I understand why investors would flock to Rocket Lab stock in hopes of getting in on a lucrative opportunity before it becomes mainstream. But as savvy investors understand, there’s always more to the picture.
I generally encourage investors to shy away from buying into narratives of a smaller company being the next big thing. For example, could Rocket Lab be the next SpaceX? Maybe, but I think when investors get too caught up in trying to identify the “next” of something, they end up connecting dots that aren’t really there and wind up being the only one who believes their own story.
Sure, Rocket Lab’s success with Electron and rising backlog could give credence to the idea that it’s beginning to encroach on SpaceX’s territory. Yet SpaceX is still a much larger and sophisticated operation compared to Rocket Lab. While I tip my cap to Rocket Lab’s progress, I wouldn’t buy the stock on speculation that it could one day eclipse the size of SpaceX.
So far in 2024, shares of Rocket Lab have soared by 243%. If you bought the stock when it was trading for around $3.50 in the spring, I’d say the recent run-up in Rocket Lab’s share price has made investors an incredible return.
While this dynamic may give the impression that Rocket Lab is indeed a millionaire-maker stock, I urge investors not to fall for such an illusion. Most stocks do not experience this level of momentum in such short time frames. That’s a nice way of saying that shares of Rocket Lab could crater back to $3 at the flip of a switch.
Don’t be fooled — those who have made considerable money in Rocket Lab stock this year benefited from more of a swing trading opportunity as opposed to a long-term buy-and-hold style investment. Personally, I cannot justify a $10 billion market cap and 26x price-to-sales (P/S) multiple for a company that isn’t projected to post a profit until 2027.
I think buying shares at current levels is rooted more in a fear of missing out (FOMO) mentality than prudent investment judgement. I would say that Rocket Lab is not a traditional millionaire-maker stock.
Before you buy stock in Rocket Lab USA, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Rocket Lab USA wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $900,893!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of November 18, 2024
Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool recommends Lockheed Martin and Rocket Lab USA. The Motley Fool has a disclosure policy.
Is Rocket Lab Stock a Millionaire Maker? was originally published by The Motley Fool
EMEA Tribune is not involved in this news article, it is taken from our partners and or from the News Agencies. Copyright and Credit go to the News Agencies, email news@emeatribune.com Follow our WhatsApp verified Channel
