While the S&P 500 has risen more than 5% since the start of 2024, shares of Rocket Lab (RKLB 3.29%) have headed in the opposite direction, plunging about 10%. After the company reported preliminary fourth quarter 2023 financial results, Main Street turned its back on the launch specialist's stock.
But one analyst thinks the sell-off is overdone. In fact, Rocket Lab has room to fly considerably higher from where it sits now in his estimation. Citigroup group reinstated coverage on Rocket Lab stock this week, and the firm's analyst, Jason Gursky, assigned a $6 price target and buy rating. From the stock's closing price on Tuesday, Gursky's price target implies 35% upside.
Two factors fueled the analyst's outlook
Gursky predicated the new price target on Rocket Lab's success in securing capital and a recent order that the company received from the U.S. government. On Jan. 31, Rocket Lab announced a private offering of $300 million in convertible senior notes, a move that will help the company complete the projects in its backlog. With regards to Uncle Sam, Rocket Lab received an order worth $515 million for the development and operation of 18 space vehicles.
Rocket Lab is a leading space stock
Of the few space stock opportunities, Rocket Lab is a leading choice as its Electron rocket is the second most frequently launched U.S. rocket. Since the company is still unprofitable, it's impossible to use traditional valuation metrics with respect to its stock. That being said, it seems quite reasonable that shares could soar to $6 if the company continues to win customer awards, replenishing and growing its stellar backlog ($582 million at the end of the third quarter 2023) as well as making progress toward achieving profits -- especially since the stock had preciously traded at $6 last September and as high as $8 last July.
