Wells Fargo Sees Notable Upside In Rocket Lab USA

Wells Fargo analyst Matthew Akers initiated coverage of Rocket Lab USA Inc 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.

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