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On Wednesday, Deutsche Bank reaffirmed its Buy rating on Rocket Lab USA (NASDAQ: RKLB), with a steady stock price target of $10.00. The firm’s analysis suggests that Rocket Lab is poised to achieve over 70% year-over-year revenue growth in 2024, a significant increase from the 16% seen in 2023.
Despite this positive outlook on revenue, the company’s EBITDA is expected to perform worse than previously estimated due to substantial investments in the development of the next-generation Neutron rocket.
According to Deutsche Bank, these investments are essential for Rocket Lab to enhance its role in the space industry, particularly as the market seeks a dependable large rocket alternative to SpaceX’s Falcon 9.
The success of the Neutron rocket could lead to a positive shift in both the company’s financials and market perception, potentially resulting in a revaluation of the stock as research and development expenses decrease.
The anticipated first launch of the Neutron rocket is still set for late 2024, although Deutsche Bank acknowledges the possibility of minor delays extending into 2025. The firm emphasizes that such delays should not be viewed negatively, as they are common in modern rocket programs. In fact, a launch within the fourth quarter would be an outlier in an industry where delays are the norm.
Deutsche Bank has updated its financial model for Rocket Lab to reflect higher projected sales in 2024 but has also factored in increased research and development costs. Despite these adjustments, the firm has reiterated its Buy rating and $10 price target, indicating confidence in the company’s growth trajectory and its strategic investments in the Neutron rocket program.
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