For the second day in a row, Rocket Lab USA (NASDAQ:RKLB) stock is on a tear. Yesterday, shares of the new space company and occasional defense contractor shot up nearly 15% on news of a big expansion in production of reaction wheels (i.e., satellite parts).
Today, Rocket Lab is up another 14.2% in 1:30 p.m. EDT trading, and — there being no other news on the wires to explain the move — probably for the same reason.
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Is that a good reason to buy Rocket Lab stock, though? Mere momentum following a move initially predicated on actual positive news?
For the time being, I think it’s hard to say because while we can see clearly that the value of each individual share of Rocket Lab stock is higher today, we really don’t have a firm grasp yet on how much the entire company is now selling for. And the reason for this is that, even a couple days after its IPO, financial data providers are still all over the map in trying to assign a value to Rocket Lab.
Now, while we’re something less than 100% sure how much Rocket Lab is worth, here’s what we do know:
According to its 8-K filings with the SEC on Aug. 31, Rocket Lab had about $108 million in the bank at the end of June — more than enough to balance out its $99 million in long-term debt. The influx of $467 million from a PIPE financing transaction attendant on the IPO implies that Rocket Lab probably has about $475 million or so in cash with which to fund its future growth plans.
Rocket Lab will need that cash, by the way, because at last report, the company had only generated about $29.5 million in revenue over the last six months and was losing money. It had operating net losses of $25.4 million through the end of June and net losses of $32.5 million. (Free cash flow was negative, too — $41.3 million.)
Long story short, Rocket Lab remains a bit of a speculative stock — a growth stock with a bright future I believe — but one for which success is far from assured. Keep that in mind before rushing to join today’s momentum rally.
This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.