Sticking With This Rocket Lab Price Target After Major NASA Announcement
Despite a stock market beatdown, this aerospace name is poised for big things thanks to its Neutron launch services agreement.
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I thought the time was appropriate on a down day for stocks and a down day for Rocket Lab USA RKLB to update my thoughts on the name for the old "Stocks Under $10" crowd and for all of my loyal readers. After all, there was news late Thursday afternoon.
The firm announced that it had reached a mutual agreement with NASA to include Neutron launch services to the agency through Rocket Lab's existing Venture-Class Acquisition of Dedicated and Rideshare (VADR) contract.
The firm's new medium-lift reusable rocket "Neutron" permits Rocket Lab to continue to broaden access to space in order to deliver a multitude of missions across a range of orbits to include CubeSats and Class D missions as well as other payloads. The firm's small launch vehicle "Electron" has already been on-ramped for NASA's VADR missions, as the firm has already demonstrated an ability to perform well under rapid, time-sensitive conditions.
The "Neutron" is designed to provide both commercial and government clientele with alternative, but still reliable launch services capable of deploying to low earth orbit. On this vehicle, CEO Sir Peter Beck commented, “Neutron brings choice and value to the launch industry and is the ideal rocket to support NASA’s goals with VADR to provide new opportunities for science and technology payloads through commercial best practice. Rocket Lab has been a long trusted and reliable launch partner for NASA missions with Electron, and we’re proud to have been selected to expand on this with Neutron.”
The Neutron rocket is expected to also be on-ramped to the U.S. Government's National Security Space Launch (NSSL) Lane 1 program to participate in an IDIQ contract valued at $5.6 billion over five years. Neutron is projected for a debut launch in Virginia sometime in mid-2025.
Notes For Civilians...
- CubeSats are a class of very small satellites with a form factor of less than four inches that are cheaper to develop and test than larger satellites.
- Class D missions are missions carrying out compelling, but lower priority investigations of low to medium complexity but requiring a high tolerance for risk.
- IDIQ contracts are common in the defense contracting world. The term stands for Indefinite Delivery, Indefinite Quantity. Simply put, an indefinite quantity of goods or services is purchased within a set time frame but without exact delivery dates.
There's More
Earlier this week, another old and new Sarge name, Kratos Defense & Security KTOS selected Rocket Lab USA for a team testing hypersonic flights for the U.S. government. The team was awarded a five-year contract with a value of up to $1.45 billion to create an affordable flight test bed that rapidly increases hypersonic flight test capacity.
Readers will remember that, about a month ago, the Department of Defense gave Rocket Lab USA the nod for inclusion in such activities. Rocket Lab does not report until late February. I expect that if not before then, at least by then, we will learn more about what Rocket Lab (and Kratos) is (are) doing along these lines, or at least what they are permitted to reveal.
Charts
Readers will see that I had been preparing to draw up a double-top pattern of bearish reversal for RKLB only recently. That has changed somewhat.
Now, readers will see that with the recent news, what might have been a double top has developed into a rising narrowing wedge. Now, this is also a pattern of bearish reversal. That said, this one does not yet look ready to close, Friday's beat-down withstanding. We have about three touches at both the supporting trend line and the less quickly rising line of resistance. That's the minimum in my book, but it could go as far as five touches to closure.
The stock continues to ride its own 21-day EMA, relative strength is off of its highs, but still healthy enough, and the MACD is no longer postured bullishly, but not decisively so. I am still okay with my $33 target price. I am not revising it higher or lower at this point. If I do, you'll be the first to know. Honest.
At the time of publication, Guilfoyle was long RKLB and KTOS equity.
