Rocket Lab (NASDAQ: RKLB) is more than a launch company; investors must remember that its business is launching rockets, which drives the stock price. The latest news is a new deal with Japanese firm Synspective for ten more launches. The operating words are “ten” and “more,” worth 2000 basis points in growth relative to the total launches coming from one of the business's oldest clients. The order is a record for the business and affirms its utility, pointing to improving traction in a growing market. Rocket Lab is the U.S.'s 2nd-most reliable launch company and one of the most active launch companies globally. 

Analysts Rocket Lab's Stock; Upside is Limited

The analysts' response is positive. Analysts had been trimming their targets in the first half of 2024, but that trend appears to have ended. Several commentaries were released following the announcement, including reiterated ratings and price targets. The consensus price target is down compared to last year but off a recent low, indicating about 35% upside for investors. The caveat is that the $6.65 consensus target aligns with the high end of a trading range. Analysts support the stock at its current level and see it moving higher, but the upside is limited. 

Among the most recent updates is commentary from Roth MKM. Analysts at the firm like the new deal because it improves visibility in the pipeline. The deal is for ten launches in 2025-2027 and does not include orders for two more launches this year for twelve more launches on the books. Bank of America recently highlighted the company as an affordable, consistent choice for business. The company’s focus on reusable technology is critical to its success and its lean into satellite components sets it up for market share gains in that industry. 

Institutional activity in RKLB stock has been light over the last few quarters, but the trends and details are bullish. Institutions are net buyers and have been for six consecutive quarters. They own nearly 72% of the stock and could soon push the total to over 80%. Recent buyers include T. Rowe Price and Associates and Tocqueville Asset Management, which increased their positions by 150% and 217%, respectively. The largest shareholders are VK Services LLC and Deer Management Co., which own about 25% of the shares. 

Is Rocket Lab Set Up for a Short Squeeze? 

Rocket Lab shares are significantly shorted and could lead to a squeeze. The latest short sale report had a short interest rate of nearly 20%, but the rate may have fallen since then. However, at ten days to cover, the stock is set up for a short-covering rally, which may already be underway. The stock could surge by another double-digit amount in this environment before topping out. The risk for investors is chasing the price action and getting caught in a bull trap. 

The company is in a hyper-growth phase, with growth expected to accelerate to 72% this quarter, but there are problems with the valuation. The company continues to post losses, which widened in the latest quarter as R&D and expenses grew. Additionally, dilution is in play and has the share count up by 2.95% on average at the end of Q1, with additional dilution forecast for this quarter. Share-based compensation and other dilutive factors are expected to shave another 0.8% average off the count. This trend is not expected to end soon. 

Rocket Lab Launches to Four-Month High, More Highs to Come

Rocket Lab’s share price is launching higher and will likely continue higher. The market shows bullish momentum, but there are risks. The market will soon be overbought with resistance still above. The critical resistance is near the $6 level and may not be broken this year. In that scenario, RKLB shares can advance 35% this year but remain range-bound over the long term until profits come into sight. That might not be for three or four more years at the earliest.