Is Rocket Lab Still a Buy?

Checking in on Rocket Lab (NYSE: RKLB)

This Weeks Newsletter is Powered by Savvy Trader!

I’ve transitioned to Savvy Trader’s platform for more transparency and real-time tracking of my portfolio. Attached below is the link to my portfolio on Savvy Trader:

https://savvytrader.com/SteveWagsInvest/stevewagsinvest

If this has issues connecting, search for “Steve Wagner | Invest” as your 2nd option. Doing this, you should be able to find my portfolio.

Failed Launch, But Not a Failed Investment

For those who've been with me since I first started coverage on Rocket Lab (RKLB), you'll know how bullish I am about the budding space economy. Several institutions are upping their predictions, foreseeing this frontier to be a staggering $1T+ market by 2024. This suggests we're just at the dawn, merely beginning to explore its vast potential. In this space (pun intended), there are only a few reliable players: SpaceX, Rocket Lab, Amazon, and Jeff Bezos' separate entity Blue Origin. Today, I want to zoom in on RKLB. But here's a heads-up: the current chatter might be a tad gloomy due to their first failed launch since 2021. So, without further ado, let's dive in...

On September 19th 2023 (as of this writing) from their New Zealand launch complex, RKLB experienced an “anomaly” during its 41st mission launch. After a successful lift-off from Launch Complex 1 and the subsequent first stage burn and stage separation, a complication arose approximately 2 minutes and 30 seconds into the flight, bringing the mission to an early end. At this time, specific details surrounding the anomaly remain limited. However, investors should view the situation in one of two ways:

1. The glitch might have resulted from issues within RKLB's setup, equipment, operations, or launch process. If this is true, it suggests that the company should be capable of identifying and rectifying the problem, ensuring that similar situations don't recur in upcoming missions. Indeed, a failure stemming from preventable errors can be disheartening for clients. Yet, a comprehensive investigation by RKLB, followed by the necessary corrective measures, would undoubtedly bolster confidence.

2. Alternatively, the anomaly could have been an unpredictable occurrence outside of Rocket Lab's domain. While I'm not intimately familiar with the intricate technical aspects, it's possible that this mishap was a one-off, attributable to unpredictable external factors. As those acquainted with the Six Sigma methodology might know, even when best practices are diligently followed, occasional defects can arise due to unforeseen external conditions.

As a steadfast, long-term investor, it's essential to keep perspective. Up until now, RKLB has boasted an impeccable 100% mission success rate since 2021, even as competitors faced setbacks. While an eventual hiccup might have been anticipated, it's unfortunate that it coincided with a client's mission. Nevertheless, this is just a single bump on an otherwise smooth journey. It's a given in the space industry that not every launch will be successful. Giants like Amazon, Virgin Orbit, Astra, and even SpaceX have all experienced their share of failed launches.

Do you recall SpaceX's Starship rocket incident in April? It exploded mid-air, yet spectators watched in awe, celebrating the spectacle as if witnessing a colossal firework. It was a testament to SpaceX and Elon's ambition, pushing the boundaries of what's achievable. And true to form, they returned, ready to design an even more impressive rocket. RKLB, however, operates slightly differently. Rather than launching its own Starlink payloads, they manage customer payloads (like the failed launch). This distinction means they face heightened scrutiny, especially during mishaps.

Yet, setbacks are inherent in pioneering new frontiers, particularly in the space industry. We still don’t know what exactly happened, and I will be waiting for a response soon, but management did say they would have to tweak their revenue guidance (as they should).

My Take