Why Rocket Lab Stock Skyrocketed Today but Fell Back to Earth

Key Points

• Rocket Lab stock was up as much as 12.9% in today's trading, but it saw a big pullback.

• The company's second-quarter results delivered sales that far exceeded Wall Street's target.

• Rocket Lab also posted a larger-than-expected loss in the second quarter, and the company's growth-dependent valuation comes with risk.

• 10 stocks we like better than Rocket Lab ›

Shares of Rocket Lab (NASDAQ: RKLB) opened Friday's trading with big gains, but it ended the daily session only modestly in the green. The space-tech company's share price rose 1% in today's trading, but it had been up as much as 12.9% earlier in the day.

It published its second-quarter results after the market closed yesterday and initially saw huge bullish momentum in Friday's session. But the stock lost ground as investors took profits and put more focus on the business' wider-than-expected loss last quarter. On the heels of today's modest post-earnings gain, Rocket Lab stock is now up roughly 75% year to date.

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The stock was volatile but still closed today's trading in the green

Rocket Lab stock has been on a big winning streak this year as space commercialization has become a popular play among growth-focused investors, and next-generation defense trends have also helped boost interest in its rocket launch services and related technologies. The company's recent quarterly release represented a significant test for the stock -- and it seems like the long-term bullish thesis is still intact.

Revenue increased 36% year over year to reach roughly $144.5 million, beating the average Wall Street analyst forecast by roughly $9.1 million. Revenue was up 36% year over year in the quarter, and the big sales beat was initially enough to power double-digit gains for the stock today before gravity set in.

The company significantly outperformed Wall Street's revenue target, but its loss of $0.13 per share last quarter also exceeded the average analyst estimate's call for a narrower loss of $0.11.

What's next for Rocket Lab?

Rocket Lab's wider-than-expected loss in the second quarter doesn't look particularly concerning in light of sales that also came in substantially higher than analysts and investors had anticipated. The company is still in what looks to be a relatively early growth stage, and its current margin profile means that quarterly sales beats are also likely to arrive with losses that are wider than expected.

Valued at roughly 36 times this year's expected sales, Rocket Lab could be poised for volatility -- but the company's long-term opportunities mean the stock warrants a look from growth-focused investors seeking exposure to the space industry.

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Keith Noonan 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.