Rocket Lab stock has rebounded in the past few days and has slowly formed a highly bullish pattern as investors start buying the dip. RKLB rose to $70, a few points above this month’s low of $60. This rebound may continue in the near term as its growth continues.
Rocket Lab stock has formed a double-bottom pattern
The daily chart shows that the RKLB stock formed a double-bottom pattern at $60, its lowest level in July and August this year. This pattern’s neckline was at $86.45, its highest level on August 10.
The double-bottom pattern coincided with the 78.6% Fibonacci Retracement level. This Fib is drawn by connecting the lowest level in November and the highest point this year.
There are signs that the stock is attempting to rebound above the Supertrend indicator, which would be a bullish sign.
On the other hand, the stock remains below the 50-day moving average, while the Relative Strength Index (RSI) has continued rising. Therefore, there is a likelihood that the stock will bounce back, potentially to the neckline at $86, which is about 25% above the current level.
On the other hand, a drop below the neckline at $60 will invalidate the bullish outlook. If this happens, it will drop to the next key psychological level of $50.
All Signs are that Rocket Lab’s business is doing well
From outside looking in, Rocket Lab’s business is doing well as it continues to gain market share in the space industry. Its recent results showed that its revenue and launches continued growing.
The revenue jumped by 62% in the second quarter to $234 million. In contrast, SpaceX’s space revenue jumped by 22.25% in the same period. Its backlog jumped to a record high of $2.36 billion, a 137% annual increase.
This backlog came from several contracts the company received for its Electron solution. It secured a $437 million in contracts across its Electron, HASTE, and Neutron launch vehicles in the second quarter. The company aims for Neutron to start its launches either this year or early next year.
For starters, Electron is the current generation of launchers, which are made to carry a payload of between 300 and 320 kilograms. Neutron, on the other hand, is designed to carry heavier payloads of about 13,000 kilograms.
Rocket Lab’s business is expected to keep growing in the coming years. The average estimate among analysts is that its annual revenue will jump by 60% to $958 million this year and $1.36 billion next year.
The company’s plan to acquire Iridium is also expected to aid its revenue growth. Yahoo Finance data shows that analysts expect its annual revenue will jump to $938 million and $995 million this year and next year. Iridium has an EBITDA margin of 47% and a net income margin of 10%, meaning that it will contribute to its profits.
Analysts have a bullish outlook for the stock. Andres Sheppard, a Cantor Fitzgerald analyst, reiterated his overweight rating on Monday. Brian Gesuale, a Raymond James analyst also initiated his view on the company with an outperform rating.
Rocket Lab stock has some potential risks. For one, Neutron has some risks since it is still a new product. Also, as we have seen with other companies, mergers and acquisitions don’t always work out.