A veteran analyst makes a surprising decision about Rocket Lab stock after a rally

Do you need space?

Then Rocket Lab USA (RKLB) can help you Space is their specialty.

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The Long Beach, Calif.-based space systems company is making its mark up there in the cosmos, and its stock price has soared with it.

Let’s take a look at what has happened lately.

On September 26, Rocket Lab said it has completed testing and integration of the second Pioneer spacecraft for Varda Space Industries, which is billed as the first space pharmaceutical processing and hypersonic Earth re-entry logistics company.

Privately owned Varda designs, builds and flies spacecraft that process pharmaceuticals in microgravity. The company aims to crystallize small molecules, which is difficult to produce in Earth’s gravity, and bring the crystals back to terra firma.

Rocket Lab’s first Pioneer spacecraft for Varda was launched last year. Varda successfully crystallized the HIV drug Ritonavir while in orbit, and the two companies landed the re-entry capsule in the Utah desert in February

“This close collaboration allows us to push the boundaries of innovation, enabling Varda to create high-value products in microgravity and bring them back to Earth,” Rocket Lab founder and CEO Peter Beck said in a statement .

Rocket Lab founder and CEO Peter Beck.

Rocket Lab CEO: “we have a clear advantage”

“We are excited to work alongside Varda as they revolutionize manufacturing processes and open up new markets through space,” he said.

A few days earlier, Rocket Lab said it launched its 53rd Electron mission and deployed five satellites into Low Earth Orbit for French company Kinéis de Internet-of-Things (IoT).

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“Kinéis Killed the RadIOT Star” lifted off from Rocket Lab Launch Complex 1 in Mahia, New Zealand.

The mission was launched three months after “No Time Toulouse”, Kineis’ first launch with Rocket Lab, and marks the second of five Electron launches for the French company.

Last month, Rocket Lab beat Wall Street’s second-quarter revenue and earnings expectations.

The company posted a loss of 8 cents per share, compared with a loss of 10 cents per share a year ago. Revenue totaled $106 million, a company record, and up 71 percent from a year ago.

Wall Street had expected Rocket Lab to report a loss of 10 cents a share on sales of $105 million.

“By owning the launch and spacecraft, we have a clear advantage when it comes to establishing our own capabilities or space constellations,” Beck told analysts during the company’s August earnings call. “We can build and launch our own spacecraft at cost and not have to wait in line for limited launch capacity.”

“We completely avoid the pain point that most constellation operators face, being at the mercy of suppliers in terms of cost and schedule, often causing deeply disruptive delays, and bringing online capacity to scale,” he added.

The company is scheduled to report quarterly results in November. Analysts are calling for the company to report an adjusted loss of 8 cents per share on revenue of $102.4 million.

Shares of Rocket Lab closed up nearly 13% on September 27 to $9.78 per share. Shares are up 77% year-to-date and 130.1% year-to-date.

The stock got a boost when KeyBanc analyst Mike Leshock raised his price target on Rocket Lab on Sept. 27 to $11 from $8, while maintaining an overweight rating on the stock, according to The Fly.

The firm hosted a no-deal roadshow with Rocket Lab and came away with increased confidence in the company’s ability to scale its business.

Veteran trader who stays with Rocket Lab for a long time

Leshock said he continues to believe Rocket Lab is positioning itself to be an industry leader in both launch services and satellite manufacturing and design.

MP Securities analyst Trevor Walsh initiated coverage on Rocket Lab on September 12 with a market perform rating and no price target.

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Rocket Lab is an end-to-end space company that designs and manufactures small- and medium-class rockets and specialized spacecraft, Walsh said.

The firm is on the sidelines due to potential near-term risks and challenges weighing on the stock, but believes there are “several strong and fundamental aspects” to Rocket Lab that could ultimately lead it to be more positive on about the name.

Challenges include launch cost concerns, increased competition and remaining uncertainty specific to the Neutron medium-lift launch vehicle, which is currently under development, as well as financial “vulnerabilities” and the competitive threat posed by Tesla. (TSLA) CEO Elon Musk’s SpaceX, the largest private space company.

TheStreet Pro’s Chris Versace tracked Rocket Lab, writing on September 27 that “the stock has been hot this week and now appears to have gone somewhat parabolic…”

“I will stick with that name for a long time, and probably a lot of it, for a while,” he wrote. “That said, since my price target has been breached in effect, I will take something out of my position as that is how my discipline code goes.”

Versace, which recently raised its price target on Rocket Lab to $9.50 from $7.50, noted that KeyBanc analyst Philip Gibbs reiterated his buy rating on the company while raising his price target to $11 from $8.

“I don’t have a new price target to go off of yet, so we’ll act again if the stock somehow clears Gibbs’ new target,” Versace said. “Until then, we are waiting for a new technical pattern to develop so that we can identify a new pivot point.”

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