Coming off a losing week two weeks ago, the indexes mostly regained that lost ground last week as the S&P 500 gained 1.9%, the Dow advanced 1.6% and the Nasdaq rallied 2%.
The Stock – Rocket Lab (RKLB)
Rocket Lab provides launch services, space system components and rocket design and manufacturing; it’s one of the major suppliers of missions and tech to the federal government’s national security-related space projects. Last week Rocket Lab expanded its capabilities for the U.S. with the pending acquisition of Geost for $275 million, which adds a portfolio of critical missile launch detection and tactical surveillance missions to the company’s backlog.
Prior to the acquisition, about 30% of Rocket Lab revenue came from launch missions for customers like the U.S. Defense Department, NASA and other agencies. The company’s main vehicle is a rocket called the Electron, which delivers 2,866-pound payloads that drive it to low-Earth orbit. The bulk of Rocket Lab’s business (70% give or take) is from space technologies, like solar panels, star trackers, command and control software and the like; Lockheed Martin, Northrup Grumman and Airbus are big customers here. There are other competitors out there, but Rocket Lab has a good niche in larger payloads.
Later this year Rocket Lab will debut Neutron, a whopping 14-ton payload rocket that puts the company in direct competition with SpaceX’s Falcon 9. SpaceX provides piggyback options for smaller loads on its missions but often can’t offer the ideal orbits Rocket Lab gets from its New Zealand launch facility. (Another competitor, Astra, is struggling with quality control issues.)
The year has gotten off to a great start for Rocket Lab—in the first quarter sales were up 32% to $123 million, and analysts see the top line lifting 31% this year and then showing acceleration in 2026 (possibly due to Neutron), with 55% growth. The bottom line isn’t as pleasing, but Rocket Lab is expected to start turning a profit sometime next year. It’s a unique story and we like that big investors are starting to pile in, with 436 funds owning shares at the end of March, up from 283 just six months before.
Technical Analysis
RKLB exploded higher in the second half of last year, breaking out of a big trading range and zooming as high as 33 in January. Such a big move meant a big drop was possible, and shares did get whacked 55% or so during the market implosion, but the stock began working its way back right away, and then accelerated higher after a brief shakeout following the Q1 report. Such a big run from the lows adds risk for sure, but RKLB’s low-volume dip after testing the 30 level looks normal. Stop – 22
The Covered Call Trade
Buy Rocket Lab (RKLB) Stock at 27.50, Sell to Open July 25 Strike Calls (exp. 7/18) for $4, or a Net Price of 23.5 or less
Static Return: $150 per covered call (6.38%)
Breakeven: 23.5
Covered Call Return (if assigned): $150 per covered call (6.38%)
Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.
However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the approximate Net Price, or 23.5 or less. (In this case, 27.5 minus 4 = 23.5. Or another example is you could pay 27 for the stock and sell the call for 3.50, which also equals 23.5.)
For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …
Open Positions
| Stock Name and Symbol | Price Bought | Current Stock Price | Stop | Option - Price of Call Sold | Current Option Price |
| ATI (ATI) | 67.8 | 81 | 54.5 | June 67.5 -- $4 | $13.00 |
| Coupang (CPNG) | 26.4 | 28.5 | 22.5 | June 26 - $1.25 | $2.50 |
| Birkenstock (BIRK) | 56.5 | 55 | 51 | July 55 -- $4 | $3.00 |
| Amer Sports (AS) | 38 | 37 | 31.5 | July 40 -- $2 | $1.25 |
The next Cabot Profit Booster issue will be published on June 10, 2025.
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