Why Shares of Rocket Lab Lifted Off Today

Key Points

• Rocket Lab is a leading launch services provider.

• Bank of America has upwardly revised its price target due, in part, to the potential of the company's Neutron rocket.

• Because it's an unprofitable company, investors should only consider Rocket Lab if they're comfortable with a higher-risk investment.

• 10 stocks we like better than Rocket Lab ›

Each day this week, shares of Rocket Lab (NASDAQ: RKLB) have closed higher than where they ended the previous day's trading session. The trend doesn't show signs of stopping today. With an analyst's positive outlook for Rocket Lab stock, investors are continuing to click the buy button on the launch services provider.

As of 2:06 p.m. ET, shares of Rocket Lab are up 10.6%.

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Development of a new rocket has this analyst optimistic

Maintaining its buy rating, Bank of America hiked its price target on Rocket Lab stock to $50 from $30. According to The Fly, the more auspicious view of the space stock is predicated on the favorable outlook for the Neutron rocket as well as the company's strength in satellite development position will provide more diverse offerings to customers.

Unlike its current rocket, Electron, the Neutron rocket is capable of larger payloads, and management is looking to its development as a major engine of growth for the company.

In March, Rocket Lab announced that the United States Space Force has chosen the Neutron rocket to compete for contracts from the National Security Space Launch program, which has a five-year ordering period that extends through June 2029 and has a maximum value of $5.6 billion.

Rocket Lab expects the first launch of Neutron to occur in the second half of 2025.

What's a potential Rocket Lab investor to do now?

It's important for those weighing an investment in Rocket Lab to remember that analysts often have shorter investing horizons than the long-term holding periods many investors favor. News of the higher price target, therefore, should be of little consequence. Instead, the company's robust backlog and progress with the Neutron program provide more concrete factors that can support an investment.

Of course, since the company is still unprofitable, only investors comfortable with a more speculative investment will want to consider Rocket Lab at this point. Fortunately, there are other space stocks to consider if Rocket Lab is deemed too speculative.

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Bank of America is an advertising partner of Motley Fool Money. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.