How would you like to swing on a star?
If so, you'd better be ready for a lot of hard work, as Peter Beck, founder, president, and CEO of the aerospace company Rocket Lab USA (RKLB) can attest.
"I think building a rocket is kind of like climbing a mountain," Beck said during an interview in May with Dave G Investing. "It doesn't feel wonderful as you're going through the process. Once you get to the top you can look back down and it feels great, but it's just a tremendous amount of work."
Related: Veteran trader updates view on Rocket Lab USA, SoFi before earnings
Beck added that a rocket development program resembles an iceberg floating in the sea.
"The rocket is the bit that's sticking out of the ocean," he said, "but all of the infrastructure and the test facilities and production lines are below the water line. It's not that obvious for everybody to see, but actually it's the majority of the work."
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Make no mistake, there certainly is money to be made in space.
The space economy is expected to be worth $1.8 trillion by 2035, significantly above the global GDP growth rate. Satellite and rocket-enabled technologies will become increasingly prevalent, according to a Word Economic Forum report released in April.
Global space economy is set to skyrocket
“Space technologies are delivering greater value to a more diverse set of stakeholders than ever before,” said Sebastian Buckup, a member of the forum’s executive committee.
“As costs reduce and accessibility rises, these technologies could reshape whole industries and have as much impact on business and society as smartphones or cloud computing," he said.
Related: Veteran analyst who predicted Rocket Lab stock surge updates outlook
The report said supply chain and transport, food and beverage, state-sponsored defense, retail, consumer and lifestyle, and digital communications are forecast to generate 60% of the global space economy by 2035, although others will also benefit.
The study said that space will play an increasingly vital role in mitigating world challenges, "ranging from disaster warning and climate monitoring, to improved humanitarian response and more widespread prosperity."
Adam Spice, Rocket Lab USA's chief financial officer, told Deutsche Bank analyst Edison Yu that "the rocket business is notorious for being incredibly capital consuming."
"There's a lot of infrastructure, and you can spend a lot of money very quickly," he said, "and we've seen people who've done that very poorly right in our space, and some of those have gone bankrupt and had a lot of challenges along the way."
Spice said that when he saw what Rocket Lab USA had done for around $100 million "and have a functioning rocket with the infrastructure and a pad and all the other things, I was blown away."
"In this business, you have a lot of dependencies on third parties, and that's really what's proven to be the Achilles heel of a lot of companies," he said.
"They overestimate the execution capabilities of their partners, and that can really lead to lots of problems. So you can go out of business through no real fault of your own," Spice added.
He noted that since Beck was born in New Zealand, his company was outside that traditional aerospace ecosystem and forced to do things on its own.
"So, as a function of that we became very independent," he said. "You might argue we're the most vertically integrated rocket manufacturer around."
Analyst sees strength in space and defense sector
Spice said that Rocket Lab USA is "a very frugal organization; everybody knows what everybody else does."
"There are no offices," he said. "It's all bullpen seating and that's there's a lot of things that come from that."
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"There's open communication, which is probably the most important thing. If you want something you literally stand up and ask the person on the other side of your wall what they're working on," he noted.
Spice acknowledged that Rocket Labs USA can't outspend Tesla (TSLA) CEO Elon Musk's Space X or Amazon (AMZN) founder Jeff Bezos' Blue Origin rocket company.
"We have to just do things very, very differently," he said. "So, everything starts with how do we how do we make this a profitable endeavor."
"I actually I hate spending money," Spice continued. "I think most CFO's are probably in that camp, so I don't think I'm particularly unique in that, but Pete's even tighter than I am, so it makes my job from that respect very easy."
Rocket Lab USA, which is scheduled to report earnings on Nov. 12, has seen its stock jump nearly 105% since January, and shares have soared nearly 176% from a year ago.
In the words of TheStreet Pro's Stephen Guilfoyle, "This one's a beauty, isn't it?"
On Oct. 23, KeyBanc analyst Mike Leschock raised the firm's price target on Rocket Lab to $12 from $11 while keeping an overweight rating on the shares as part of a broader research note on the Aerospace sector.
Leschock noted that slowing order rates and the onset of inventory accumulation followed "nearly unabated" positive momentum over the last three years.
However, Leschock said he is "confident" on the prolonged tightness within the Aerospace and Defense aftermarket and strength in Space & Defense sector.
Related: Veteran fund manager sees world of pain coming for stocks
