Last week, SpaceX made headlines by successfully launching and “catching” its 20-story Starship rocket, marking a significant step toward reusing rockets for missions to the Moon and Mars.
Starship is set to be the largest rocket ever, capable of carrying 150-250 tons and over 100 passengers on interplanetary missions. Two decades ago, this seemed impossible, but now with SpaceX and others, the space economy is ready to grow rapidly.
However, since SpaceX is a private company, investors can’t buy its stock. But there’s a publicly traded competitor, Rocket Lab (RKLB 1.22%), that’s worth considering for those interested in the space sector.
Rocket Lab: A Strong Challenger
Rocket Lab has been competing with SpaceX since it introduced its Electron rocket, which is smaller but growing rapidly in launch rates. In the second quarter of this year, Rocket Lab secured 17 new Electron launches worth $141 million, with a backlog exceeding $1 billion.
Diversifying Revenue Streams
Rocket Lab is not just stopping with the Electron rocket; it’s also developing a larger rocket called Neutron, which will significantly increase its launch capacity. Additionally, Rocket Lab creates and sells other space systems, with most of its revenue coming from these efforts.
In the future, the company aims to branch into space data and services, potentially selling satellite data or internet services, similar to Amazon’s Project Kuiper.
RKLB Free Cash Flow data by YCharts
Is the Stock a Good Buy?
Investing in Rocket Lab comes with risks. Currently, it’s not very profitable, burning about $150 million in cash annually, and may not profit until the Neutron rocket launches. Despite these challenges, there’s considerable potential for growth. Rocket Lab is valued significantly lower than SpaceX, which is estimated at around $200 billion.
If Rocket Lab continues to grow its launch services, space systems, and data services, it could generate over $10 billion in revenue in the next decade, a promising outlook in a space economy valued at over $500 billion.
Given this potential, Rocket Lab appears to be a strong buy-and-hold investment for those optimistic about the future of the space economy.
