Prediction: This hypergrowth space stock will be worth more than SpaceX in 10 years

SpaceX has been remarkably successful over the past 15 years. It revived the spaceflight industry in the United States — indeed, around the world — and inspired a host of imitators along the way. The era of commercial spaceflight is upon us and is set to grow like gangbusters over the next 10 to 20 years. By 2050, the United Nations believes the space economy could be worth $3 trillion.

Industry experts believe that SpaceX has a de facto monopoly on commercial rocket launches right now, which is why its valuation has topped $200 billion. But that monopoly can quickly turn into a duopoly. Come in The rocket lab (RKLB 1.75%). Founded by New Zealand entrepreneur Peter Beck, it is now the only other company, along with SpaceX, to reliably and safely perform rocket launches for commercial customers.

Rocket Lab is growing like gangbusters and recently reached a market cap of $3.5 billion. But the party may be about to begin. I think Rocket Lab has a chance to be worth more than SpaceX in 10 years and be a home run for investors. Here’s why.

Fast growth, minimal competition

Rocket Lab entered the rocket launch market with a small system it calls the Electron. It was meant to attack SpaceX at the edges by providing a more nimble, smaller and cheaper launch vehicle for customers looking for this niche. The product has built up a ton of momentum over the past few years. In fact, it recently reached 50 launches, making it the fastest commercially developed rocket to reach 50 launches in history. Growth is also accelerating with a 100% increase in launch frequency from the second half of 2023 to the first half of 2024.

This momentum has led to a lot of recent client acquisitions. To date, the company has signed 17 new Electron launches, grown its backlog to over $1 billion, and increased revenue by 71% over last year. Business abounds in 2024.

As SpaceX focuses on larger launches, it is unlikely to attack Rocket Lab’s position with small commercial launches. And since no other rocket launch competitor has been able to consistently launch, Rocket Lab currently has a monopoly on the small launch market. Not a bad place to be.

Upscaling to larger releases

The Electron isn’t all Rocket Lab wants it to be. They are currently working on the Neutron rocket (sensing a pattern in their naming?), which will be much larger than the Electron and can carry about 40 times the customer payload. Commercial releases are paid by weight, which means we could see a huge increase in revenue once the Neutron system becomes fully operational.

Over the past 12 months, Rocket Lab generated $327 million in revenue. Not all of this is from the Electron launch segment (more on that later), but a good portion of it is. According to insiders, SpaceX has been able to charge customers $5,000 per kilogram or more on the Falcon9 rocket.

If Neutron can charge the same, it will generate $65 million in revenue per launch from payload payments alone, or 20% of its total revenue over the last 12 months. The good news is that Neutron is slated to become open to commercial customers in the next few years.

RKLB Revenue (TTM) data by YCharts

Big ambitions and a focused leader

Rocket Lab’s next stage of growth should come from the Neutron system. However, it has bigger ambitions than just launching satellites into Earth orbit. The Neutron rocket will be capable of carrying humans, meaning Rocket Lab could take astronauts to the moon or even Mars. It already has contracts for unmanned missions to Mars with NASA and other US government agencies.

In addition to rocket launches, Rocket Lab works to build and sell equipment for space systems to customers. These include things like space solar panels and space capsules for missions.

In the long term, it hopes to build a third step of its business model with data and space services. As one of the only vertically integrated companies for space launches, it has extremely valuable data from orbit. This could be the most valuable part of Rocket Lab’s business model, as software and data services come with high profit margins.

Another positive for Rocket Lab is its focused leadership. Elon Musk built SpaceX but owns and operates many other businesses including adzeTwitter and Neuralink. It’s not an exaggeration to call him distracted. Rocket Lab’s visionary founder Peter Beck is singularly focused on building this company, which I think is an advantage as he tries to break into SpaceX’s monopoly.

It might not look like it today, but I think there’s a good chance that Rocket Lab will take its $327 million in revenue and turn it into a business that generates tens of billions of dollars a year over 10 years. Even if it takes more than 10 years, Rocket Lab has a chance to take its $3.5 billion market value and eventually surpass SpaceX’s $200 billion valuation.

Spaceflight is far from a low-risk sector, but Rocket Lab looks like a promising growth stock with plenty of upside potential for investors right now.