- Wells Fargo analyst Matthew Akers initiated coverage of Rocket Lab USA Inc (NASDAQ:RKLB) with an Equal Weight rating and a price target of $5, implying an upside of 19%.
- RKLB is an early leader in small space launch and space infrastructure with exposure to New Space growth upside, but with a more achievable growth forecast than its peers, stated the analyst.
- Akers mentions that given RKLB's well-established launch (second most used U.S. vehicle), space infrastructure businesses, and more conservative growth expectations, he believes it to be less risky than many of its New Space peers.
- He added that despite many more successful launches, RKLB has guided to a lower future launch revenue than its small launch counterparts.
- Related: Here's Why Wells Fargo Sees 55% Upside In Maxar Technologies.
- The analyst believes RKLB is well positioned among the "new" space companies to become public recently.
- Akers notes that RKLB's outlook for 30%+ margins remains to be proven as prior public launch/space infrastructure margins have been closer to ~10%.
- The analyst believes that the service component of the market will capture a significant share of the economic value of New Space; however, this phase will take several years after RKLB has fully built out its launch and space infrastructure businesses.
- RKLB will reach cash breakeven sooner than many of its New Space counterparts, says Akers. He added that this is still a few years away until the massive LEO small satellite ramp takes hold in the late 2020s.
- Price Action: RKLB shares are trading higher by 0.60% at $4.21 on the last check Tuesday.
