The Pentagon is getting serious about building hypersonic missiles. That's good news for Rocket Lab (RKLB +0.39%) -- which just a couple of months ago inked its biggest-ever contract (at the time) to perform 20 hypersonic test flights over the next four years.
It could also be good news for defense tech unicorn company Anduril Industries, because Anduril just hired Rocket Lab to help it out with hypersonics, too.
Image source: Getty Images.
HASTE doesn't make waste for Rocket Lab
To remind, Rocket Lab's hypersonics contract, awarded in March, falls under the Department of Defense's (DOD) Hypersonic Accelerator Suborbital Test Electron (HASTE) program, and will be worth $190 million to Rocket Lab. Rocket Lab has developed a reputation for success in hypersonics, having already launched seven such test flights with its Electron small rocket -- with 100% success.
Anduril will be working on the HASTE program as well, in partnership with Rocket Lab -- and in return for paying Rocket Lab $30 million for its expertise.
What does Anduril get out of this?
Anduril and Rocket Lab will partner on three HASTE hypersonic launches using Rocket Lab's Electron rocket, launching from Rocket Lab's East Coast launch site on Wallops Island, Va., with the first flight scheduled to take place less than one year from now.
It's not entirely clear how long it will take to complete the testing, but historically, Rocket Lab has shown an ability to launch HASTE missions as quickly as one per month on top of its regular satellite launch schedule.
The companies made it clear that these test flights are not part of the DOD contract, and will be paid for "through Anduril's own internal capital."
What does Rocket Lab get out of this?
So, potentially, Rocket Lab might earn the entire $30 million in less than a year and add nearly 5% to its annual revenue stream. What's more, Rocket Lab notes that HASTE contracts now account for nearly one-third of its contracted backlog. It's not too great a stretch to say that if Rocket Lab is two-thirds a space company, it's now also one-third a defense stock.
Is that a good thing or a bad thing for Rocket Lab stock? At the least, I'd say it helps to diversify the company's revenue streams even further, which should lend some ballast to a stock price that has roughly quintupled over the past year and could use some stability.
NASDAQ: RKLB
Key Data Points
The even greater significance of all these HASTE contract wins, though, is what they mean for the business.
Rocket Lab, as you know, is hard at work building a new medium-lift rocket called Neutron. With up to 15 tons of lift to Low Earth Orbit, Neutron will boast as much as 50 times the payload capacity of Electron. You might think this creates an argument for phasing out Electron in favor of Neutron for future launches.
With HASTE generating upwards of $50 million in contracts for Rocket Lab annually, though, I think there's a good argument for keeping Electron around awhile longer -- and I think Anduril would agree.
