Finding at least a few compelling investment prospects is rarely tough to do. Identifying the single-best growth stock to buy at any particular time, however, is a different story. The underlying company in question must not only offer a distinctly superior product or service, but must also be in a business that's set to continue growing for the foreseeable future. Applying this standard dramatically cuts back on your number of qualified prospects.
The list is smaller, but there's at least one promising name on it that fits the bill right now. That's Rocket Lab USA (RKLB +0.16%). If you've got $1,000 in idle cash you know you can commit to a long-term investment, it's arguably your best growth bet at this time.
Being first isn't always best
It's not exactly a household name. As you might have guessed though, Rocket Lab is in the business of putting satellites into orbit. Its reusable 60-foot Electron rocket design has now made 61 successful launches, deploying 211 satellites and simultaneously proving that privatized Earth-to-orbit service is possible.
Granted, Elon Musk's SpaceX has already done the same in a far more dramatic -- even if far more concerning -- fashion. Although several of its so-called "heavy lift" Falcon launch vehicles along with a few of its cargo and crew-carrying Starships have been lost during unmanned test flights, the fact is, SpaceX has enjoyed more successful flights than failures.
Musk's company has also demonstrated the risks of moving too aggressively with too much ambition though. While Falcon may be the most modern rocket design capable of ferrying a massive 20,000-plus kilograms into orbit, the problem-riddled launch vehicle solves a problem that doesn't exactly exist at the moment. NASA's Space Launch System (SLS) is already a well-proven heavy lift design, for instance, and most orbital launches are achieved just fine with something smaller and more reliable like Rocket Lab's Electron.
That's not to suggest bigger rockets don't have value. They do. More powerful rockets will be needed to get back to the moon, and then eventually to Mars. Rocket Lab USA is even working on its own medium-lift vehicle -- called Neutron -- that's scheduled to complete its inaugural launch sometime next year. Although it's still not as big as Falcon or SLS, the company says Neutron should be capable of carrying the vast majority of all satellites expected to be deployed for the next several years. It's also going to be capable of starting interplanetary and moon missions.
More important for investors, not being the first to this market has given Rocket Lab more time to design and build a reliable vehicle that isn't mired in a few too many high-profile failures.
But what makes this ticker the smartest growth stock to buy right now?
Catching a major tailwind
Don't misunderstand. While Rocket Lab USA may bring a bunch of potential upside to the table right now, there's also plenty of risk in owning a piece of this up-and-coming company. It's possible that bigger SpaceX could still figure out how to make Falcon and Starship completely reliable, as well as more cost-effective than smaller rockets like Neutron and Electron. It's also possible analysts are just misjudging present and future demand for orbital launches.
Possible, but not necessarily likely.
Think about it. Some seemingly resilient industries rise and fall simply because time and technology eventually offer alternatives. Take brick-and-mortar retailing, cable television, and even automobiles as examples. Then there are some businesses that are built to last simply because they're just too important. Pharmaceuticals, mobile phones, and utilities are some of these businesses. Their products and services might evolve over time, but the industries themselves are here to stay regardless of the economic backdrop.
Space launches are far more like the latter rather than the former. That's because the world is so reliant on what's being ferried into orbit. Branding and market-measurement research outfit Dewesoft reports that over half of the 4,550 satellites currently circling the Earth are used for electronic communications. As we increase our dependence on mobile devices at the same time artificial intelligence accelerates the proliferation of the Internet of Things, look for this proportion to grow.
Now connect the dots. The world may need as many orbital launch options as it can get. To this end, Polaris Market Research believes the global space launch industry is set to grow at an annualized pace of more than 12% through 2032. Rocket Lab's top line is expected to grow at a considerably faster pace though, particularly within the next couple of years once Neutron rockets begin making regular flights. In fact, a handful of commercial Neutron launches have already been lined up even before the first flight has been performed.
Data source: StockAnalysis.com. Chart by author.
In the meantime, Electron will continue to fly as well.
Don't fixate too much on the stock's recent weakness
It's all quite promising, raising one key question... why are Rocket Lab USA share prices down 40% from their late-January peak?
NASDAQ: RKLB
Key Data Points
It's not an indictment of the company's prospects or potential. Rather, it's mostly the result of overly aggressive buying in 2024 that finally ran out of steam right around the same time the broad market itself started steering into a correction.
In other words, unlucky timing is painting more of a bearish picture than is merited.
That pullback is your opportunity to step into the stock before the expected swing to a profit the year after next though. And as veteran investors can attest, sometimes simply making progress toward an inevitable fiscal goal is enough to light a fire under a stock.
This might help: Despite its recent volatility and setback, the analyst community still collectively rates Rocket Lab stock as a buy, while the consensus price target of $25.03 per share is 30% above the stock's present price. That's not a bad way to start out a new position.
The kicker: While the dust from the news is still settling, the company's recently announced plans to acquire Germany's Mynaric is being viewed as growth-driving victory rather than a concerning expense. Mynaric's laser-based communications technology will provide satellite owners and operators with a more reliable and cost-effective means of managing their equipment, addressing another pain point for many players in the business.
Of course, Mynaric's solution will become just one more of many in Rocket Lab's technical toolkit. Look for the company to do what it did with all the rest, which is leveraging them into a robust suite of satellite tech.
Just bear in mind that bigger opportunities like this one bring bigger risks and bigger volatility with them.
