This analyst just raised his price target on Rocket Lab USA

Roth Capital Partners analyst Suji Desilva says Rocket Lab USA’s (Rocket Lab USA Stock Quote, Chart, News, Analysts, Financials NASDAQ:RKLB) planned acquisition of Iridium Communications would strengthen its position as an end-to-end space platform with launch, satellite manufacturing, spectrum and recurring revenue applications.

In a June 29 update, Desilva maintained his “Buy” rating on Rocket Lab and raised his target to $130.00 from $100.00

“We believe the combination satellite launch/manufacturing capability and owned spectrum leveraged to deploy and support recurring revenue space-based applications represents a formidable competitive position comparable to competitors SpaceX and Amazon,” he said.

Rocket Lab announced it will acquire Iridium for $54 per share, implying a calendar 2027 sales multiple of 10 to 11 times after adjusting for about $2-billion of net debt. Desilva said that compares with Rocket Lab’s current valuation of about 50 times EV/sales.

The offer is split roughly evenly between cash and stock, with the cash portion funded by balance sheet cash, ATM proceeds to date of $1.6-billion and a new $3.6-billion senior secured bridge facility. Desilva expects the deal to close in mid-calendar 2027.

He said the acquisition should be significantly accretive, with Iridium generating operating margins of 57% on a revenue run-rate of nearly $900-million, compared with Rocket Lab’s revenue run-rate of about $800-million and negative 13% operating margin.

“We are encouraged by the combination of launch/satellite manufacturing under now the same roof as space-based application capability and key global comms spectrum, resulting in an asset configuration like SpaceX and Amazon,” Desilva said.

Iridium operates a constellation of 66 low-Earth-orbit satellites and has about 2.5 million active subscribers. Its applications include aviation and marine communications, Internet of Things connectivity, direct-to-device services, alternate positioning, navigation and timing, and defence and government-grade connectivity.

Desilva said Iridium brings recurring revenue and better visibility to Rocket Lab’s financial model. He expects Rocket Lab to expand Iridium’s constellation over time, benefiting from lower launch costs and in-house satellite products.

The analyst also said both companies are trusted partners of the U.S. government and defence agencies, creating potential for additional large program awards.

 

-30-

Tagged with: rklb
Rod Weatherbie

Rod Weatherbie is a journalist based in Prince Edward Island. Since 2004, he has written extensively about the Canadian property and casualty insurance landscape. He was also a founder and contributing editor for a Toronto-based arts website and a PEI-based food magazine. His fiction and poetry have been featured in The Fiddlehead, The Antigonish Review, and Juniper.

Recent Posts

Galaxy Digital wins new $41.00 target at ATB

ATB Capital Markets analyst Martin Toner raised his target on Galaxy Digital (Galaxy Digital Stock Quote, Chart, News, Analysts, Financials… [Read More]

15 hours ago

Is it time to sell your AutoCanada stock?

Desjardins Securities analyst Gary Ho initiated coverage of AutoCanada (AutoCanada Stock Quote, Chart, News, Analysts, Financials TSX:ACQ) with a “Hold”… [Read More]

15 hours ago

This analyst loves Hydro One

Desjardins Securities analyst Brent Stadler maintained his “Buy” rating and $61.00 target on Hydro One (Hydro One Stock Quote, Chart,… [Read More]

1 day ago

Aviat Networks: Buy, Sell or Hold?

Roth Capital Partners analyst Scott Searle maintained his “Buy” rating and US$38.00 target on Aviat Networks (Aviat Networks Stock Quote,… [Read More]

1 day ago

Despite soft results, Thermal Energy International still a buy, analyst says

Beacon Securities analyst Russell Stanley maintained his “Buy” rating and $0.25 target on Thermal Energy International (Thermal Energy International  Stock… [Read More]

1 day ago

TD raises target on Chorus Aviation to $35.00

TD Cowen analyst Tim James raised his target on Chorus Aviation (Chorus Aviation Stock Quote, Chart, News, Analysts, Financials TSX:CHR)… [Read More]

2 days ago