Rocket Lab adding reusability 'is a key differentiator,' Stifel says, calling for stock to jump 78%

Published Wed, Oct 20 202110:58 AM EDTUpdated Wed, Oct 20 20212:59 PM EDT

Michael Sheetz @in/michaeljsheetz @thesheetztweetz

Stifel sees Rocket Lab's work to reuse the Electron rocket's boosters as "a key differentiator" for the space company, with the firm calling for the stock to climb 78% from current levels. "We view the development of reusability of Electron as a critical differentiator for RKLB in the small launch segment to stay a step ahead of a potentially crowded market in the future," analyst Erik Rasmussen wrote Tuesday in note to clients. Rocket Lab announced Tuesday that its next launch, within a window that opens Nov. 11, will feature its third attempt to return an Electron rocket booster back to Earth and recover it after splashdown , following two previous successes. Rocket Lab CEO Peter Beck said the mission represents "the last test" before the company attempts to use a helicopter to catch a rocket booster, with a grappling hook to snag the booster's parachute. Stifel has a $22 per share price target on Rocket Lab, which went public in August . That represents a 78% upside from Tuesday's close of $12.36 per share. The stock is up about 18% since its debut. Stifel noted that Rocket Lab adding reusability to its orbital rockets — a practice pioneered by Elon Musk's SpaceX — would reduce the cost and increase the number of launches Rocket Lab can conduct in a year. The firm estimates that reuse would cut the cost of producing each Electron rocket by about 80%, while needing to manufacture just 4 to 8 boosters per year to achieve a cadence of 38 launches in a year by 2027, with the boosters capable of being reused five to 10 times each. Rocket Lab faces rising competition from other private rocket builders, a sector that is steadily expanding. SpaceX has begun launching more small satellites with its rideshare missions, while Virgin Orbit has successfully delivered satellites to orbit. Astra , Firefly Aerospace , ABL Space , and Relativity Space are planning to attempt the same feat within the next year. But Stifel believes Rocket Lab "is one of the highest quality space companies to enter the market." "With a proven and successful track record in small launch as well as an evolving satellite bus and Space Systems/components business, we believe a premium valuation is warranted," Rasmussen wrote. — CNBC's Michael Bloom contributed to this report.

The 16th Electron launch in November 2020, when the company recovered the rocket after splashdown for the first time.

Rocket Lab

Stifel sees Rocket Lab's work to reuse the Electron rocket's boosters as "a key differentiator" for the space company, with the firm calling for the stock to climb 78% from current levels.