Why Rocket Lab Stock Popped on Monday

After slumping at the start of the month, Rocket Lab (RKLB +10.31%) stock is getting its groove back post-holiday on Monday.

Thanks to an over-the-weekend endorsement from over-the-ocean investment bank Deutsche Bank, shares of the small space rocket manufacturer gained 1.8% through 1:40 p.m. ET.

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NASDAQ: RKLB

Rocket Lab USA

Today's Change

(10.31%) $6.81

Current Price

$72.88

Key Data Points

Market Cap

$41B

Day's Range

$68.94 - $75.06

52wk Range

$14.71 - $99.58

Volume

35M

Avg Vol

22M

Gross Margin

31.66%

What Deutsche Bank said about Rocket Lab

Scanning the stock market and settling upon six industrials stocks "to buy & hold for the next 12 months," Deutsche included well-known names like Delta Air Lines and First Solar, but also tiny Rocket Lab, which the banker rates a buy -- and says could double in share price over the next year.

Deutsche values the sub-$5 stock at $10 a share, essentially double its current price, but precisely how Deutsche arrived at this number is a mystery.

Is Rocket Lab stock a buy?

In a note covered on StreetInsider.com Sunday, Deutsche calls Rocket Lab "an underappreciated disruptive growth story ... driven by a robust launch manifest and marquee wins for its satellite business, paving the way for 2024/beyond."

And that's correct so far as it goes. The company's "upcoming missions" page describes roughly two dozen launches on the company's manifest, including the company's transformative 10-rocket launch deal with Japan's Synspective, and its contract to put its biggest-ever constellation of satellites in orbit for France's Kineis.

What Rocket Lab doesn't yet have is profits. Despite booking more than $280 million in revenue over the past year, Rocket Lab lost more than $180 million. Analysts who follow the stock don't expect it to reach break-even profits until 2026.

By 2027, however, their prediction is that Rocket Lab will be firmly in the black -- and profits could more than triple to $0.45 per share in 2028. At today's share price of just under $5, that works out to a P/E ratio of about 11.

Granted, Rocket Lab needs to earn its first profit before it can begin growing profits. But as that happy day grows closer, Rocket Lab's stock is only going to look more attractive.