The Best Space Stock to Invest $1,000 in Right Now
Key Points
Many space-oriented stocks went public by merging with special purpose acquisition companies (SPACs). That process was faster and simpler than filing a traditional initial public offering (IPO), but it also allowed those start-ups to set ambitious pre-merger forecasts that weren’t permitted in IPO filings.
Those SPAC-backed space stocks initially attracted a lot of attention, but most of them failed to live up to their own rosy expectations. Many of those companies went bankrupt, were derailed by regulatory challenges, pivoted toward other industries, or went private again.
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Today, only a handful of those SPAC-backed space stocks remain. One of those stocks is Rocket Lab (NASDAQ: RKLB), a developer of reusable orbital rockets. Last October, I called it the best space stock for a speculative $500 investment.
Image source: Getty Images.
Rocket Lab’s stock has rallied 376% since then — so your $500 investment would be worth $2,380 today. It might be tempting to take some money off the table after those impressive gains, but I think it deserves an even more confident $1,000 investment today for four simple reasons.
1. Rocket Lab’s Electron launches are accelerating
Rocket Lab’s Electron rocket can carry small payloads of up to 300 kilograms into space. It serves a different market than SpaceX, which carries heavier payloads with its Falcon rockets. It’s already launched its Electron rockets 74 times to deploy 240 satellites, and its major customers include NASA, the U.S. Space Force, the Swedish National Space Agency, Capella Space, Kinéis, and BlackSky Technology.
It launched six rockets in 2021, nine rockets in 2022, 10 rockets in 2023, and 16 rockets in 2024. It expects to complete at least 20 launches in 2025. That acceleration was largely driven by the growing market for small satellites and constellations. Its launches also became faster, more efficient, and more reliable as its technology matured.
2. The Neutron rocket is coming
Rocket Lab plans to launch its second rocket, the Neutron, in 2026. That new rocket will carry bigger payloads of up to 13,000 kilograms, but it will still be smaller than SpaceX’s Falcon 9, which has a maximum weight capacity of 22,800 kilograms.
The Air Force Research Laboratory (AFRL) already chose the Neutron to conduct some of its upcoming payload delivery demonstrations, and it’s competing against other rocket makers for up to $5.6 billion in government contracts under the National Security Space Launch (NSSL) Phase 3 Lane 1 program (which tests out vehicles for national security missions). That early interest indicates it could launch a lot more Neutron rockets over the next few years.
3. Rocket Lab is becoming an “end-to-end” space company
Rocket Lab originally generated most of its revenue from its lower-margin Electron launch services. But over the past four years, it expanded its higher-margin space systems business by acquiring smaller companies and launching more add-on services.
Today, Rocket Lab generates nearly three-quarters of its revenue from its space systems segment, which designs integrated satellite solutions for its customers. One of those top solutions is its Photon satellite bus platform, which shifts satellites into their correct orbits. Those value-added solutions and services could lock in its customers, lift its gross margin, and drive it to further expand its ecosystem.
That’s why Rocket Lab recently acquired Mynaric, a leading laser communications provider, as the “latest strategic step” in its goal of becoming an “end-to-end” space company. That diversification would help it capitalize on the expansion of the global space economy, which McKinsey estimates will grow from $630 billion in 2023 to $1.8 trillion by 2035.
4. Rocket Lab stock deserves its premium valuation
From 2024 to 2027, analysts expect Rocket Lab’s revenue to nearly triple from $436 million to $1.2 billion as it ramps up its Electron and Neutron launches. They also expect its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to turn positive in 2026 and nearly quadruple to $170 million in 2027 as its pricing power improves and it expands its higher-margin space systems business.
With a market cap of $27.7 billion, Rocket Lab might seem too expensive at 23 times its projected sales for 2027. But we should remember that SpaceX, which launched 138 Falcon rockets and generated an estimated $13 billion to $14 billion in revenue in 2024, was valued at $350 billion at the end of 2024 — or 26 times its trailing sales. So if Rocket Lab continues to scale up its business, it could grow at a faster clip than SpaceX and maintain its premium valuation.
Rocket Lab is still a speculative stock, but it’s carving out a defensible niche in the reusable orbital rocket market. If economies of scale kick in before its smaller competitors can catch up, its stock could soar higher as it expands and evolves into a diversified play on the nascent space transportation market.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.