Aerospace and defense powerhouse SpaceX famously launches rockets into orbit, then turns them around and lands its flight-proven rockets back on Earth. In the annals of space travel, it's the only private company that's ever managed to accomplish this feat.
Or rather, SpaceX has been unique up until now.
Image source: Rocket Lab.
Introducing Rocket Lab -- and its amazing rocket-catching helicopters
Earlier this month, SpaceX small-scale imitator Rocket Lab (RKLB 9.52%) -- which builds small rockets that carry only a fraction of the payload of a SpaceX Falcon 9 and currently throws away each rocket after use -- announced that it's going to try and follow in SpaceX's footsteps by attempting to reuse a rocket for the very first time.
Before this month is out (Rocket Lab hasn't set an exact date yet), the company plans to launch its 26th Electron mission into orbit from its Launch Complex 1 in New Zealand. First, the rocket in question, named There and Back Again, will deliver its payload of 34 tiny satellites into orbit. That accomplished, the rocket itself will parachute back to Earth, and Rocket Lab will attempt to snag the parachute with a helicopter, then gently deposit the rocket stage back on Earth.
This isn't a trick SpaceX could manage because its rockets are so big. It's also a trick SpaceX doesn't need to manage because it's gotten so good at landing rockets on retrojets. But for Rocket Lab, this really is the only viable means of reusing rockets because Electron is too small to carry enough fuel to both (a) deliver payloads to orbit and then (b) power retrojets to land on its own.
Be that as it may, if Rocket Lab succeeds in this audacious enterprise, it will join SpaceX among the ranks of space companies flying reusable rockets.
Cue applause from Wall Street
Space investor Morgan Stanley applauded the plan in a note released earlier this month, doubling down on its "overweight" rating on Rocket Lab stock and reiterating its $17 price target on Rocket Lab stock. If Rocket Lab hits that target, it will deliver an instant two-bagger of today's $8 stock price for new investors.
As the analyst explained, if Rocket Lab can become the second company to master rocket reusability, this will "further widen the moat between itself and [its small rocket-launch] competitors," such as Astra and Virgin Orbit, for example. But Morgan Stanley also hinted at a second big reason why reusability would be good news for Rocket Lab.
NASDAQ: RKLB
Key Data Points
More rocket launches, please
Historically, one of Rocket Lab's biggest problems has been building rockets fast enough to keep up with demand for small satellite launches. When the company first floated the idea of using helicopters to rescue and reuse spent rocket stages back in 2019, CEO Peter Beck said this would be a "fantastic" way to double the number of rockets Rocket Lab can launch in a year without spending any more money on building more rockets.
Indeed, in musing about how this month's There and Back Again mission could change the outlook for Rocket Lab, Morgan Stanley suggested that if Rocket Lab can increase the cadence of its rocket launches past 35 per year by 2026, this would create "upside risk" to its $17 price target. I.e., it could mean Rocket Lab stock is worth even more than $17 per share.
Mind you, this is a very big "if." In 2020, Rocket Lab only launched seven rockets into orbit -- and in 2021, that number went down, not up, to just six launches. Even if Rocket Lab succeeds with There and Back Again and manages to reuse its rockets once or twice, that still leaves a huge gap between here and 35 launches per year.
Baby steps to total reusability
That being said, Electron rockets aren't the only arrows in Rocket Lab's quiver. Last year, the company announced it is forging ahead with its next project and will build an even bigger Neutron rocket that can land on its own retrojets like a SpaceX Falcon 9. Morgan Stanley predicts Neutron could be 70% to 80% reusable like a Falcon 9 and cites Neutron as yet another factor that could help Rocket Lab outgrow its $17 target price.
Granted, by the time Neutron is flying in 2024, Rocket Lab will already be nine years behind SpaceX in reusable rocket technology. (SpaceX landed its first rocketship way back in 2015). But if Rocket Lab can keep ahead of everybody else who is not named SpaceX, simply being "No. 2" in this space race may be enough to turn this growth stock into a success story for space investors.
