Rocket Lab Acquires Advanced Solutions for $40M; Street Says Buy

Space company Rocket Lab USA, Inc. (RKLB) recently announced that it has completed the acquisition of Advanced Solutions, Inc., an aerospace engineering company, for $40 million. Meanwhile, there is potential for an additional $5.5 million performance earnout based on CY 2021 results.

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Following the news, shares of the company declined 3.9% on Tuesday. The stock, however, pared its losses slightly to close at $13.65 in extended trade.

Rocket Lab’s Space Systems portfolio is likely to receive a boost with this buyout, as Advanced Solutions’ expertise in flight software, mission simulation Guidance, Navigation and Control solutions will now be in its repertoire. Also, post the buyout, Advanced Solutions will continue to serve its customers by leveraging Rocket Lab’s resources, team and technology.

The CEO of Rocket Lab, Peter Beck, said, “The ASI team revolutionized flight software and have enabled some of the most significant space exploration missions. For more than 20 years they have been delivering industry-first, off-the-shelf spacecraft flight software products that enable cost-effective and highly capable constellation and interplanetary missions. By joining forces, we believe it will have a transformative effect on the way spacecraft are designed, built, tested, launched, and operated, further unlocking space’s potential.” (See Rocket Lab stock chart on TipRanks)

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Recently, Stifel Nicolaus analyst Erik Rasmussen initiated coverage on the stock with a Buy rating. The analyst’s price target of $22 implies upside potential of 63% from current levels.

According to the analyst, the company has established itself as a leading player in the small satellite market, which bodes well. Further, the analyst observes that with its current product offerings, the company has a total addressable market for launch and satellite services of about $30 billion. He expects revenue to rise from about $50 million in 2021 to about $1.6 billion by 2027, while EBITDA to be around $500 million in the same year.

Consensus among analysts is a Strong Buy based on 3 Buys and 1 Hold. The average Rocket Lab price target of $22 implies upside potential of 63% from current levels.

Rocket Lab scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations. Shares have gained 38.6% over the past year.