Rocket Lab USA (NASDAQ: RKLB) shares visited a lot of places in 2023, at one point up about 100% for the year but also losing about half of their gains for the year over a matter of months.
The ups and downs likely left investors with whiplash day-to-day, but if you zoom out Rocket Lab appears to be heading in the right direction. Shares of the space start-up finished up 46.7% in 2023, according to data provided by S&P Global Market Intelligence, and the company enters 2024 on a lot more stable footing compared to a year ago.
Rocket Lab experiences highs and lows as it matures
Rocket Lab is one of a number of young space companies that have hit public markets in recent years thanks to the SPAC boom. While all are years away from establishing themselves among the space titans, Rocket Lab has made itself into a formidable rival to more accomplished space companies.
Rocket Lab is aiming to be a "one-stop shop" for government and corporate customers, providing satellite design, manufacture, launch, and operations. The company is also a specialist in more cost-efficient, small-rocket launches, making it a price leader in getting small items into space. And despite its name the non-launch business is a substantial generator of revenue, accounting for about two-thirds of total sales.
The shares soared midyear thanks to some strong earnings reports and signs of a growing backlog, but crashed back to Earth in September after the company experienced a launch failure. Rocket Lab temporarily put operations on hold while it investigated what went wrong, eating into near-term revenue.
By December, Rocket Lab was back in business and the stock finished on a high note. Late in the month, the company disclosed a $515 million deal with a government agency to build and operate 18 satellites. The deal is an important one because it helps validate Rocket Lab's technology, and provides some revenue predictability for the rest of the decade.
Is Rocket Lab a buy heading into 2024?
Of all of the space start-ups that have gone public in recent years, Rocket Lab looks like one of the safer stocks. Yet, as we saw in 2023 nothing is a given with space. Rocket science is hard, and potential corporate customers could be difficult to win over should the economy falter and businesses need to cut costs.
Rocket Lab has a good model, $288 million in the bank, and a growing roster of customers. But it will be years before we know whether this business is able to reach its potential.
For investors who can handle volatility and are willing to ignore near-term drama in favor of long-term potential, Rocket Lab might be an intriguing stock to consider. But given the risks, buyers should limit it to a small part of a well-diversified portfolio.
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