New Rocket Lab Price Target After $275 Million Deal Turns Heads
The aerospace firm gets a significant target price change as a big acquisition puts it firmly in the national security conversation.
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Core Sarge-folio holding and former core "Stocks Under $10" portfolio holding Rocket Lab USA RKLB ran 13.14% on Tuesday. I currently see a last sale with a $29 handle ahead of the opening bells down on Wall Street and up at Times Square. That said, the stock has traded above my $30 target price overnight. At the last sale that just crossed my office tape, RKLB is now up 101.3% since the lows of the day on April 7, less than two months ago.
The News
Rocket Lab announced on Tuesday that the firm was acquiring Geost from ATL Partners' Lightridge Solutions for $275 million in a deal that includes a mix of $125 million in cash and $150 million in privately-placed common stock. There is also another $50 million in potential additional cash payments tied directly to revenue generation thresholds.
Who is Geost? Geost is an electro-optical and infrared payload development and manufacturing operation headquartered in Tucson, Arizona. The firm also provides high-priority satellites for national security purposes. Geost has been noted for its delivery of advanced sensor systems for missile warning, missile tracking, intelligence gathering, surveillance and reconnaissance. Earth observation and space domain awareness are also among Ghost's operational abilities.
These are all core capabilities that would, in effect, aid Rocket Lab in achieving Department of Defense goals for resilient, proliferated space-based architectures such as President Trump's proposed "Golden Dome" as well as the Space Development Agency (SDA) "Tracking Layer."
The deal is expected to close later this year and likely cements Rocket Lab's place as a new player in the end-to-end national security space solutions provider.
The CEO
Rocket Lab CEO Sir Peter Beck commented:
"With the acquisition of Geost, we’re bringing advanced electro-optical and infrared payloads in-house to support secure, responsive, and cost-effective systems at scale. These technologies enable spacecraft that can detect, interpret, and respond to threats in real time, enhancing our role as a trusted provider of end-to-end space capabilities for the United States and its allies — with greater speed, intelligence, and operational control."
From Wall Street
Stifel Nicolaus analyst Erik Rasmussen (rated at five stars by TipRanks) reiterated his "buy" rating on RKLB while increasing his target price from $29 to $34. Rasmussen had just increased that target from $24 to $29 on May 9. Rasmussen told investors that he is "encouraged" by the Geost deal and that Rocket Lab is positioning itself "as a disruptor for national space security."
Roth Capital analyst Suji De Silva (also rated at five stars by TipRanks) reiterated his "buy" rating on RKLB while increasing his target price from $35 to $35. Desilva told investors that he, as well, is encouraged by Rocket Lab's portfolio expansion that should drive increased opportunity for the firm in meeting demand for integrated solutions offerings.
Updating My Plan
As always, once a target price is reached, I must take action, so at least a token profit will be taken on Wednesday morning once this column goes public, so I do not front-run my own piece. (See how nice I am? I could have just written about a different stock.)
Readers will see that I have overlaid a cup pattern on top of the double-bottom pattern of bullish reversal that had worked so well for us. Will the cup add a handle? It could. It does not have to.
For now, the pivot is the left side apex of the cup. Once a handle is added, the pivot moves across to the right-side apex of the cup. This will result in a significant increase in the pivot, which had been the April high.
That in turn will result in a sizable increase in my target price. Once again, and it has become a regular thing, the old "Stocks Under $10" portfolio has simply outperformed, by a wide margin, anything and everything that it could have possibly been compared to. Relative strength is very strong and just starting to scratch the surface of possibly becoming technically overbought. The daily MACD continues to hold a robustly bullish posture. Rock and freakin' roll.
Rocket Lab USA (RKLB)
Target Price: $39 (up from $30)
Pivot Point: $31 (up from $23.80)
Add: Down to the 50-day SMA ($21.10)
Panic: Loss of the 200-day SMA ($18.30)
Net Basis: $9.08
At the time of publication, Guilfoyle was long RKLB equity.
