1. Rocket Lab USA Inc. (NASDAQ:RKLB)
Short % of Float: 16.43%
Number of Hedge Fund Holders: 15
Rocket Lab (NASDAQ:RKLB) is an end-to-end space company that designs and manufactures spacecraft and spacecraft components, small and medium-class rockets, and related services and software to support the space economy. It also delivers spacecraft design services, reliable launch services, spacecraft components, spacecraft manufacturing, and other on-orbit and spacecraft management solutions that ease access to space.
The company operates in two segments: the Space Systems segment and the Launch Services segment. The Space Systems segment comprises spacecraft components, spacecraft engineering and design services, spacecraft manufacturing, and on-orbit mission operations. The space systems segment provides solutions that make up the building blocks for spacecraft, including reaction wheels, solar solutions, composite structures, separation systems, radios, power solutions, and command and control spacecraft software. The Launch Services segment encompasses launch and launch-related services on a ride-share or dedicated mission basis.
Rocket Lab’s (NASDAQ:RKLB) biggest competitive advantage is its ability to establish its own space capabilities and constellations. It can build and launch its own spacecraft at cost without having to wait in line for limited launch capacity. With the demand for data and services provided by spacecraft continuously increasing, the company is in a position to deliver long-term recurring revenue and incremental value for shareholders.
Apart from its long-term competitive edge, the company is delivering solid fundamentals. Revenue for Q2 2024 surpassed the $100 million for the first time in company history, reaching $106 million. It also achieved a 15% quarter on quarter increase and 71% year on year increase, showing the company’s continued strength in offering diversified services and products. This growth is primarily driven by a significant growth in its space systems business and increased launches. As of Q2 close, the company’s backlog sits at more than $1 billion.
Overall, RKLB ranks first among the 10 worst aerospace stocks to buy according to short sellers. While we acknowledge the potential of aerospace stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RKLB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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