Has the Rocket Lab (RKLB 0.64%) rally already begun?
Two weeks ago, I made the bold prediction that, after Rocket Lab stock lost 38% of its value in just 30 trading days, much of the risk had been squeezed out of the stock -- and it might finally be safe to buy into this rocket stock.
Two weeks later, the stock is already up 16% off its lows, including a surprisingly strong 10% rally that happened Thursday. (This rally may have been prompted by reports that OpenAI is looking to buy a Rocket Lab rival by the name of Stoke Space, aiming to put artificial intelligence data centers in orbit.)
Whatever the reason for Rocket Lab's stock bounce-back, it's starting to look as if Rocket Lab stock has finally found its "bottom," and is ready to move higher again. Here are three reasons the stock might be your next great investment -- and potentially a millionaire-maker.
Image created by JesterAI.
Beam me up, Scotty. There's more artificial intelligence in space.
As GeekWire reports, OpenAI CEO Sam Altman is seriously considering placing data centers in orbit. There are two big reasons for this: First, space is cold, making it cheap to keep AI semiconductors cool. Second, space has abundant access to sunlight, which solar panels can use to power the AI chips.
There is, of course, the need to get the data centers into orbit in the first place. Altman seems to think the simplest solution is to buy a rocket company that can launch the servers (not to have to pay someone else to do it). In so doing, he'd be taking a page from Elon Musk's playbook; Musk famously uses his SpaceX rockets to put his Starlink internet satellites in orbit on the cheap.
Could similar thinking make Rocket Lab stock an acquisition target for other AI companies? At just $26 billion in market cap, it's not inconceivable. Worst case, the OpenAI/Stoke rumor just reminded investors of another possible market for Rocket Lab's rockets.
Neutron rising
Speaking of rockets, Rocket Lab's latest -- and biggest -- rocket, the Neutron reusable launch vehicle, is potentially just a few months away from its first launch. In November, CEO Peter Beck confirmed that the first Neutron rocket should arrive on Wallops Island, VA, in January and will launch just as soon as the company has finished testing it.
Wall Street analysts polled by S&P Global Market Intelligence expect Neutron to help turn Rocket Lab profitable about one year after it enters service. And logically, once Rocket Lab turns profitable, it will attract a lot more investor interest than it does while currently unprofitable.
The best time to buy Rocket Lab stock may be before Neutron begins launching.
NASDAQ: RKLB
Key Data Points
Valuing Rocket Lab
Ultimately, whether a stock is a buy or not comes down to valuation. And granted, valuing Rocket Lab before it turns profitable requires some guesswork -- but even so, analysts predict that, if all goes according to plan, Rocket Lab stock could be earning more than $5 a year by 2034. At today's share price of $59 and change, that's less than 10 times future earnings.
If you think that's a cheap price, then Rocket Lab stock might be a buy.
