Rocket Lab USA: Space Launch Business To Drive Operational Leverage

Jun 11, 202416:18 UTC

Rocket Lab USA Inc RKLB shares tanked in early trading on Tuesday, just days after the company announced the window for its 50th Electron launch.

The company is poised to benefit from operating leverage as its launch business scales, while it continues to grow its products, according to Goldman Sachs.

The Rocket Lab USA Analyst: Noah Poponak initiated coverage of Rocket Lab USA with a Neutral rating and price target of $4.50.

The Rocket Lab USA Thesis: The company has become a market leader in dedicated launch to space, although this area has "inherent risk, given it is cost intensive and episodic,” Poponak said in the initiation note.

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The company's products business "has grown faster than expected, creating a recurring revenue and high margin segment," the analyst wrote.

"RKLB is currently EBITDA and free cash flow negative, in an investment cycle with Neutron, and the level of, and path to, future profitability has uncertainty," Poponak stated. He added, however, that margin expansion and positive cash flow generation should be driven by "innovation in propulsion, composites, and reusability" going ahead.

RKLB Price Action: Shares of Rocket Lab USA had declined by 2.85% to $4.43 at the time of publication on Tuesday.

Photo: Courtesy of Rocket Lab

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