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Shares of Rocket Lab USA, Inc. (NASDAQ:RKLB) were upgraded to Outperform from Market Perform, with the price target lifted to $8 from $6.50 by a Cowen analyst on Wednesday.
Following the upgrade, Rocket Lab’s share price rallied by 15%.
The analyst said they’re upgrading the aerospace manufacturing firm for key execution milestones, an improved competitive position, and benefits from Russian sanctions.
“RKLB is the leader in the fragmented but fast-growing small sat launch market with the best U.S. launch record after SpaceX. Its competitive pluses are (1) demonstrated success, (2) low cost reusable design, (3) scale cost advantages, (4) its own launch pads, and (5) a product growth plan with Neutron, a medium launch vehicle,” stated the analyst.
He added that the company is also an end-to-end merchant supplier of space systems, making it the launch provider (after SpaceX) “most likely to achieve financial success.”
Commenting on Russian sanctions, the analyst explained that they impact Soyuz and NOC’s Antares, launchers comparable in size to RKLB’s Neutron, scheduled for the first launch in 2024.
“Soyuz did ~11 launches in 2021 for Europe, which no longer will use it. Antares has two remaining Russian RD 181 engines. NOC is developing an upgraded version with Firefly engines, but it won’t fly until 2025 and likely will be more expensive than Neutron,” he explained. “Based on Electron ramp & initial Neutron launches, we estimate 55-50% CGR in 2022-25 launch revenues with near doubling in adj. gross margin to ~40% on volume leverage & reusability benefit.”
