Rocket Lab: B of A Securities maintains Buy, raises PT to $50 from $30.

Rocket Lab: B of A Securities maintains Buy, raises PT to $50 from $30.

Bank of America has increased its price target for Rocket Lab (RKLB) from $30 to $50, while maintaining a Buy rating. This upward adjustment comes as Rocket Lab continues to advance in developing its Neutron rocket and enhances its comprehensive satellite services. These strategic developments highlight the company's potential for growth in the aerospace sector [1].

Wall Street analysts forecast that the average target price for Rocket Lab USA Inc (RKLB) is $35.12, with a high estimate of $50.00 and a low estimate of $20.00. The consensus recommendation from 15 brokerage firms indicates an "Outperform" status, suggesting that analysts are bullish on the company's prospects [1].

Based on GuruFocus estimates, the estimated GF Value for Rocket Lab USA Inc (RKLB) in one year is $16.96, implying a downside of 61.97% from the current price of $44.6. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at, calculated based on historical multiples and future performance estimates [1].

Rocket Lab USA Inc (RKLB) reported a near-record quarterly revenue of $122.6 million, marking a 32% increase compared to the previous year. The company successfully launched five Electron missions with 100% mission success and has been selected for the Department of Defense's high-value launch contract in the National Security Space Launch (NSSL) program. Additionally, Rocket Lab is expanding its vertical integration with the acquisition of Mynaric, specializing in laser-based satellite communications [1].

However, the company experienced a sequential decline in revenue of 7.4% due to lower-priced Electron missions and a reduction in component businesses. Rocket Lab reported a negative GAAP operating cash flow of $54.2 million in the first quarter, driven by lumpy cash receipts and continued investment in Neutron. The company faces challenges with production and supply chain issues, particularly highlighted in its acquisition of Mynaric [1].

The company is making significant progress with its Neutron launch vehicle, targeting its first launch in the second half of the year, which is expected to drive future growth. According to the latest earnings call, there has been decent technical progress with Neutron during the last quarter, including the completion of the second stage qualification and a ramp-up in the engine test program. The first Neutron flight is still targeted for the second half of 2025 [2].

Richard Drury, an analyst, upgraded his rating to a hold, noting that the feud between President Trump and Elon Musk could be a positive development for Rocket Lab. He also mentioned that the company has a better chance of gaining new contracts with the US government, which accounted for 62% of total sales in FY 2024. Drury expects a significant increase in the launch segment backlog as soon as Neutron takes its first flight [2].

Risks include the $515 million SDA Tranche 2 contract risk due to Pete Hegseth's $50 billion cost-cutting target for FY 2026. The chance of the DOD terminating the contract in favor of utilizing SpaceX's Starlink constellation is now slim, but not zero. Additionally, shares are overbought, and insiders have been selling shares in June [2].

References:
[1] https://www.gurufocus.com/news/2980253/rocket-lab-rklb-sees-price-target-boost-from-bofa-rklb-stock-news
[2] https://seekingalpha.com/article/4801270-rocket-lab-i-was-dead-wrong-with-my-sell-rating-but-i-wouldnt-start-a-long-right-now