Space company Rocket Lab USA (RKLB) has witnessed a 39% rise in its stock year-to-date and an impressive 628% jump over the past year. New contracts, the success of its Electron rocket, and optimism around the upcoming debut of its Neutron rocket have driven RKLB stock higher. While Goldman Sachs acknowledges Rocket Lab’s competitive advantages, it prefers to assign a Hold rating and be on the sidelines due to the stock’s “premium valuation” compared to peers.
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Goldman Sachs Assigns Hold Rating to RKLB Stock
Goldman Sachs analyst Noah Poponak assigned a price target of $27 to Rocket Lab stock, indicating a 24% possible downside from Friday’s closing.
Poponak noted the massive interest in space. He stated that RKLB has “idiosyncratic drivers” for revenue growth and offers differentiated products and services that give it competitive advantages. He also highlighted the company’s success in establishing itself as the “go-to dedicated launch provider” and a “reliable second option” for space launch after Elon Musk’s SpaceX. Poponak expects an increase in launch frequency and revenue-generating missions for RKLB’s new medium-lift rocket, Neutron, to drive significant operating leverage and scale.
While the Neutron rocket is expected to unlock new markets and boost opportunities for Rocket Lab, the 4-star analyst thinks that it carries huge risk ahead of its initial launch. He also believes that it will take time to ramp up production of the Neutron rocket. Additionally, Poponak pointed out that RKLB is not currently profitable or generating positive cash flows, is in an investment cycle regarding Neutron development, and visibility into normalized financials is limited. Consequently, he believes that RKLB stock is trading at a premium valuation relative to other companies in Goldman Sachs’ coverage.
Is RKLB a Good Stock to Buy Now?
While Goldman Sachs is sidelined on Rocket Lab USA, several analysts are bullish on the stock’s prospects. Overall, RKLB stock scores a Strong Buy consensus rating based on nine Buys and three Holds. The average RKLB stock price target of $30.20 indicates a downside risk of 14.6%.
