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Why Rocket Lab Stock Crashed by More Than 12% Today

By Rich Smith – Sep 10, 2021 at 11:37AM

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What goes up must come down.

What happened

After five straight days of dramatic share price gains, Rocket Lab USA (RKLB -5.00%) looks poised to end its winning streak on Friday. As of 11:30 a.m. EDT, shares of the small rocket launching company and recent SPAC IPO had tumbled by 12.7%.

And no, there's no big news to explain the plunge.

Green up arrow button and red down arrow button

Image source: Getty Images.

So what

Rocket Lab's recent stock price gains were easily explainable as driven by investor excitement over its approaching quarterly report, and the stock's 37.3% surge on Thursday was the company's reward for not disappointing on earnings. Although it didn't report a profit, its revenues more than tripled year over year in the first half of 2021, and management promised further top-line growth from a new contract to launch an entire constellation of communications satellites for French Internet of Things company Kinéis over the next few years.

However, after Rocket Lab's stock price doubled over the space of five trading days, the good news wasn't quite enough to overcome traders' temptation to "take profits." 

Now what

All that being said, just because the truism says that "what goes up must come down," that doesn't mean that what comes back down can't bounce right back up again.

Ultimately, how Rocket Lab fares as an investment will depend on its ability to keep growing revenue, and eventually turn some of that revenue into profits great enough to justify its increasingly large market capitalization. However, in the short term, PR will be what drives this stock -- announcements of new contracts, and new space missions to come.

So if you want to find out when Rocket Lab stock will "go up" again, keep an eye on the headlines.

Rich Smith owns shares of Rocket Lab USA, Inc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Rocket Lab USA, Inc. Stock Quote
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