Rocket Lab USA (RKLB 3.29%) investors experienced a lot of highs and lows in 2023, but the year went out with a bang. Shares of Rocket Lab gained 26.3% in December, according to data provided by S&P Global Market Intelligence, after the space company announced a $515 million deal to build and operate a fleet of satellites for a government customer.
December fireworks lift the stock
Rocket Lab is part of a new breed of space companies racing to make space more affordable for corporate and government customers. The company had a mixed record in 2023, setting a new single-year record by completing 10 successful launches, but also experiencing the failure of one of its rockets back in December, which led to a three-month grounding.
The year ended on a high note when Rocket Lab disclosed a deal with an unnamed government agency to build and operate 18 satellites. The deal, which would help fill out Rocket Lab's launch schedule between 2027 and 2030, is worth $489 million, with a potential extension to operate the satellites through 2033 for an additional $26 million.
The announcement was a spark for the shares, which have traded as high as $8.05 and as low as $3.62 over the past year. While the September failure reminded investors of the risk that comes with space investing, the contract was a reminder of the potential.
Is Rocket Lab a buy heading into 2024?
Rocket Lab, despite its name, has always aspired to do a lot more than just launch rockets. The company aims to use organic growth and proceeds from its special purpose acquisition company (SPAC) deal to create a one-stop shop for space customers, offering a complete set of tools to design, build, launch, and maintain satellites.
The government deal is a nice validation of Rocket Lab's approach, and should give investors reason for optimism that the plan is progressing as management hopes it will. But there is still a lot of risk here, and a number of other companies, ranging from Elon Musk's SpaceX to established defense titans to start-ups, trying to get in on what is still an uncertain business.
Rocket Lab is valued by the market at nearly $2.5 billion, which is more than 5 times the $428.47 million in sales the company is expected to generate in 2024 assuming everything goes right. A lot of the near-term potential here is already priced in, and as investors saw back in September if anything goes wrong the reaction is likely to be volatile.
That said, for those with a long time horizon who can handle the ups and downs of a start-up company in a challenging industry, Rocket Lab is establishing itself as one of the standouts among this next generation of space start-ups. For those with patience and the ability to handle turbulence, Rocket Lab is an intriguing stock to consider.
