I got in a debate with a RLKB investor. He said rockets always go up, and this stock will go about 10x more. No data behind it other than rockets being important for security.
Doing a brief analysis the PE RATIO (for one) is like -600, and won't show positive for many years.
Someone then responds with, if you want to use "old man PE RATIOS then invest in the sp500".
So is this how investors think these days?
Posted by retrorays
23 Comments
Did you just start investing?
The market has never been “rational” — ever.
just thank them for the donations… Rockets do go UP, but they also FREEFALL when the fuel is burned up.
yeah your friend sounds like he’s going to lose a lot of money very soon
There is an old saying: “Fundamentals don’t matter………until they do”. Stocks without solid fundamentals are the first to sink like a rock when the market has a hiccup.
If it’s known or guaranteed that the stock will go up 10x then it would already have gone up a large portion of that already.
The reason it hasn’t is that growth isn’t guaranteed, and even if there’s a chance it could work out that way that chance is weighed down by the much higher chance it doesn’t.
An early growth company may be investing heavily so the PE ratio is not a relevant metric. It doesn’t mean it’s not overvalued. What you need to do is estimate potential revenue and profits in 5-10 years to see if the stock price makes any sense. Obviously it is very hard to do in a market that hardly exists today and you don’t know if they will have a solid moat. It is a highly speculative investment. Makes sense to have small amounts allocated to a few companies like this hoping that one will make it.
All types of investing are valid. Value, Index buy/hold, momentum, speculative narratives, meme stocks, etc are all ways to invest. Some may think one way is more righteous than another but they all have potential to make or lose money. Find what works for you and dont worry about everyone else.
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There are a lot of stupid people in everything. Specially stuff that can give them a lot of money very quickly.
“The rules of thumb last until they don’t.” Is Maxim that Mara Liasson from NPR says quite often that I sometimes think about.
People were saying the same things about the PE ratios during the dot com bubble but companies like Microsoft are still around. Is the correction coming? Probably.
Will your preferred stock survive? That’s the million dollar question.
Nothing wrong with allocating part of your portfolio to moon shots.
The PE ratio doesn’t account for the $805m contract they just got. PE looks back, price looks forward.
would you have bought netflix and amazon when they were 300+ PE 10 years ago?
Last week I saw somewhere that RKLB was trading at 35 PE? Didn’t check myself.
“Rockets always go” – amazing investing strategy. I bet the guy thinks he’s clever since it actually worked (so far).
You talked to one guy..
I’ve learned it’s all about forward expectation. Stocks can preemptively get insane PE ratios, but eventually they have to deliver. The “bubble” will pop is the company fails to meet future expectations. If they meet future expectations, the price could stay and continue to grow.
RKLB is my largest position.
I think the fair value is currently ~$30 per share.
My thesis is that in 20 years the space economy will not be a monopoly of only SpaceX. I expect other major players to be Blue Origin, Rocket Lab, and maybe 1-3 others.
The company is producing losses because they are developing Neutron. Once Neutron is operational then they will begin generating free cash flow.
If I am correct then Rocket Lab will be much larger than it is today. It is clearly speculative how much the company will grow, and its future depends on Neutron being successful and scaling well, space systems continuing to grow and be able to provide components and custom satellite builds for any use, and developing one or multiple profitable constellations that are still to be determined.
One can make assumptions to arrive at a $15 or $100 share price today. I personally feel comfortable at my $27 average cost basis and have no intention of selling for 10+ years.
Dude will yolo into something super risky with 0 understanding of how to do any kind of valuation of it and get a 5000% return anyways while you play it safe. If you do the same though you will lose everything, I don’t make the rules it’s just how it works.
Can RKLB be 30X or less in 3 years ? If no …
SpaceX is the one to own.
One of the investing lessons I learned over the past few years is that things don’t go the way they “should”.
Here’s the *real* exercise: when was the last time the market actually valued fundamentals?’
The theory seems to be that we will find a way to grow productivity so much with technology that the PE will become justifiable.
MMT also plays a role.
The market always goes up. Until it doesn’t. Been a LONG time since we had a serious correction — COVID doesn’t count and 2018 ain’t shit.