$Rocket Lab(RKLB.US)

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Rocket Lab (RKLB) Investment Analysis

Hello everyone, this is the Morning All Life US stock channel. Today, I am very excited to discuss a stock with you - Rocket Lab, with the ticker RKLB. This stock has really surged recently, and I want to ask those of you in front of the screen how much you have made from it lately, please let me know in the comments.

Whether you are interested in this stock or you have already built a position and want to add to it, please make sure to bookmark this video and watch it to the end. In this video, I will compare Rocket Lab with SpaceX, analyzing and comparing them in terms of business, rocket design, and valuation. At the end of the video, I will tell you how I plan to operate and give you some reasonable advice.

If this is your first time watching my video and you find it useful, feel free to subscribe, and I hope to have more free discussions with everyone in the future.

Video Content Framework

I will divide this video into four parts:

1. My RKLB holding history and returns
2. Comparison of RKLB and SpaceX's overall business and differences in rockets. I will take this opportunity to analyze Rocket Lab's Neutron rocket, its design, and reusability in detail.
3. Valuation comparison of RKLB and SpaceX
4. My operations and advice for everyone

Holding History and Returns

We can see that on October 16, 2024, I purchased this stock for the first time, and then added to my position, now holding a total of 1,600 shares. Although I sold 100 shares as a memento after the stock surged following the third quarter earnings report, I quickly regretted it the next day and bought it back at a lower price.

I also had an options trade that was set up before the earnings report, and I sold it after the stock surged post-report. This 20 contracts of options earned me a 700% return. If I include all realized gains, my current holding cost for these 1,600 shares is about less than $9.

RKLB vs SpaceX Business Comparison

Having disclosed my holdings, let's get to the main topic: the comparison between Rocket Lab and SpaceX. Why compare? Because we all know that SpaceX is the leader in the space sector, and comparing it can better reflect Rocket Lab's value and what shortcomings it has

Overall Business Comparison

Rocket Lab's current business is divided into two categories:

1. Rocket launch business
2. Satellite services business

It is important to note that its satellite launch business is currently the main source of revenue, accounting for about 80% of its income. This ratio is crucial for investors, as they need to understand that the revenue generated by the Electron rocket is very limited at present, so the upcoming launch of the Neutron rocket will create greater value for Rocket Lab.

SpaceX's main business is quite simple:

1. Rocket launch business
   • Represented by the Falcon series
   • Currently includes Falcon 9 and Falcon Heavy
   • Of course, it also includes the developing Starship
2. Starlink business
   • Targeting both retail consumers
   • And companies
   • Solving the internet issues on Earth for everyone

According to estimates from payload.space.com, SpaceX's revenue in 2024 (this year) is expected to reach around $13-14 billion, with the revenue from the Starlink network exceeding that from rocket launches. It can be said that both Rocket Lab and SpaceX have businesses that complement each other.

Rocket Technology Comparison

To understand rockets, one must know that most rocket designs today are multi-stage rockets. A multi-stage rocket means that the first stage rocket engine provides thrust, accelerating the rocket to a certain speed, after which the first and second stages separate, and the second stage rocket engine continues to ignite, further accelerating the payload into orbit.

Next, we will delve into a comparison of SpaceX's Falcon 9, Starship, and Rocket Lab's Neutron rocket.

Falcon 9

Undoubtedly, SpaceX's Falcon 9 is currently the most successful rocket:

• First stage is reusable
• Low Earth orbit payload: 22 tons
• Height: 70 meters
• Diameter: 3.7 meters
• Equipped with 9 Merlin engines

Here we need to discuss rocket recovery; why is recovery so important? Because the recovery of heavy rockets significantly reduces the cost per launch, which is why both Rocket Lab and SpaceX are focusing on this aspect. However, we also know that rocket recovery involves not only technical difficulties but also costs, mainly including the costs of rocket landing, transportation, and maintenance.

Starship

Before focusing on Rocket Lab's Neutron rocket, let's briefly understand Starship:

• Low Earth orbit payload: > 100 tons
• Height: 121 meters
• Equipped with 36 Raptor engines
• Both first and second stages are reusable

I believe everyone has seen the earlier launches of Starship, which were very impressive.

Neutron Rocket

The characteristics of the Neutron rocket are:

• Low Earth orbit payload: 13 tons
• Height: 43 meters
• Diameter: 7 meters (almost twice that of Falcon 9)
• Equipped with 9 newly developed Archimedes engines
• It is important to note that although it is only a first-stage reusable rocket, its design cost is mainly concentrated on the first stage.

From the schematic diagram, we can simply understand that all the red parts actually form a whole, which can be understood as the first-stage rocket, while the middle white part is the second-stage rocket, and the top openable part is called the fairing.

We can see that the design of the Neutron's fairing is very unique; it has a two-piece petal opening shape that can directly eject the second-stage rocket, and then complete the overall recovery of the first-stage rocket and fairing.

I personally really like the design of Rocket Lab's Neutron rocket because its entire design is innovative, and it was designed for reusability from the very beginning.

Finally, returning to this comparison chart, I want to emphasize that although Rocket Lab's Neutron rocket's payload is not as much as Falcon 9 and far less than Starship, it represents a qualitative leap compared to current electronic rockets. Therefore, the research and development of the Neutron rocket is crucial for Rocket Lab, and it can almost be said to be related to the fate of the company.

Investment Risk Analysis

Before discussing valuation, I must pour some cold water on everyone because investors' enthusiasm for the space sector has been excessively high recently. We need to calmly recognize that investing in space is very risky, and I will elaborate on three points:

1. High risks in rocket development (internal risks)

• Although the Neutron development is currently going smoothly, there is still a long way to go.
• The second-stage rocket initially failed in its first three launches.
• SpaceX once faced bankruptcy panic.
• Therefore, Rocket Lab cannot always have smooth sailing.

1. External factors:

• Investors' overly high expectations will put greater pressure on Rocket Lab.
• If there are issues in the development of the Neutron rocket, the stock price will plummet.
• Will the enthusiasm for space exploration continue to rise, or will there be a day of retreat?

From the schematic diagram, we can see that the Neutron rocket has many important steps to go before launch:

• Both the second-stage and first-stage rockets need to successfully pass static fire tests.
• Finally, there is assembly and rehearsal.
• Any mistake in any of these steps will affect the stock price, not to mention issues after the launch.

Valuation Analysis

After understanding the above basic knowledge, we come to the most important part: valuation. We all know that SpaceX is a private company, but we already know its historical valuation changes, which can serve as a reference. Meanwhile, Rocket Lab, as a public company, is not yet profitable, so I will use the Price to Sales Ratio to measure its valuation.

SpaceX Valuation History

From 2016 to 2024:

• Revenue: Increased from $1.8 billion to an estimated $14 billion
• Valuation: Increased from $15 billion to the latest $210 billion
• P/S ratio: Increased from 8.3 in 2016 to 43.5 in 2021, then began to decline, with an estimated value of only 15 in 2024

RKLB Valuation Analysis

Revenue Changes:

• 2022: $210 million
• 2023: $240 million
• 2024 Estimate: $440 million (almost doubled)

Latest Market Capitalization (as of November 27): $12.8 billion Current P/S ratio: 28.8

Two Expected Scenarios for 2025:

1. Optimistic Expectation (80% Growth)

• Annual Revenue: $800 million
• P/S ratio at the same stock price: 16

1. Neutral Expectation (50% Growth)

• Annual Revenue: $670 million
• P/S ratio at the same stock price: 19.2

Whether it's 16 or 19.2, this number is much closer to the same financial metrics as SpaceX. In other words, Rocket Lab's current valuation has already reached the end of next year.

If we assume the P/S ratio remains unchanged:

• Revenue Growth of 80%: Stock price would reach $46
• Revenue Growth of 50%: Stock price would rise from $25.7 to $38.5

As an investor, if the P/S ratio truly remains unchanged, regardless of whether it's an 80% or 50% growth, the change in stock price will be difficult to digest next year.

It is important to note that even if the Neutron rocket is successfully developed, it will not generate any operating revenue by 2025, as clearly stated by the CEO in the last conference call.

Reasons for Long-term Optimism

Despite this, I remain optimistic about Rocket Lab as a long-term investment. Aside from some common reasons for optimism, I have three specific reasons:

1. SpaceX, as the industry leader, has been cultivating this field for 20 years and has paved the way for newcomers in terms of technology and capital. As a follower, Rocket Lab, as long as it has innovative capabilities, I believe it will succeed.
2. I have a very positive view of Rocket Lab CEO Peter Beck, as he possesses both technical and leadership abilities. I believe he can lead Rocket Lab forward. This gives me more confidence in the development and progress of the Neutron rocket.

Investment Recommendations

1. Short-term Speculators

• Need to wait for a better P/S ratio
• Either market sentiment pushes the stock price down
• Or wait for the company's revenue to steadily grow next year, lowering the P/S ratio
• If P/S = 20, the stock price would be approximately $17.7, which can be used as a reference value

1. Existing Position Holders with Significant Profits

• It’s best to hold onto the shares

1. Long-term Investors

• Optimistic but concerned about volatility can hedge future stock price fluctuations through Long Call
• Slightly pessimistic investors who feel the upside is limited and want to wait for a lower position to add to their holdings can use Sell Put to wait for better accumulation opportunities

Again, these recommendations are for reference only, as everyone's investment situation and mindset are different. However, I hope that the information I shared about Rocket Lab, in addition to these suggestions, can help you better understand this company and analyze its potential future trends and risks