Small cap stocks are usually risky right? Especially when a similar industry stock just went bankrupt? Or is it just an opportunity? With Rocket Lab ($RKLB), I see an opportunity! After Virgin Orbit filed for bankruptcy on April 3rd, RKLB dropped 10% from the 3rd to the 5th! Additionally, in the beginning of March, two analysts decreased their price targets. And sure, this likely means that less growth is being factored in. But what are the price targets now? The lowest was still $10! While it’s usually not best to rely on those targets, that’s still a 250% increase from current sub-$4 levels!
And how did I find this stock? After seeing the opportunities in banking stocks after the collapse of SVB, I figured that Virgin Orbit’s chaos might create similar, albeit smaller effects on aerospace stocks. With Northrop Grumman, Lockheed Martin, and Boeing seeing no major effects (with Lockheed even being up a bit), I figured some of the smaller cap stocks might be worth a look, and I came across Rocket Lab. With a market cap under $2 billion, it’s a little riskier and more volatile. However, it does seem to also be very cyclical based on charts, leading me to believe that this may be a great opportunity for a swing trade.
I am planning to buy Rocket Lab stock this week on any dips, and opening a conservative position, looking to add more as long as it stays under $4. With no dividend and a history of being cyclical, I will be viewing this as purely a swing trade, likely to sell most of my position at $5 for a 25% gain, or potentially at $4.50-$4.75 for definitive gains. Again, this is a riskier pick, so make sure to pay close attention and manage risk well!
Unfortunately, when I actually wrote this article Rocket Lab was under the $3.75 mark. It got close to reaching $4 yesterday, so make sure if you do buy in, to be okay with taking smaller gains after the big start to the week! Or else, it might be a good idea to wait for a little dip for a better entry point since I see this as a swing trade.
The financial advice, including stock ideas, provided on my finance blog are solely my opinions based on my personal experience and research. It is important to note that this information should not be taken as professional financial advice. It is highly recommended that individuals consult with a certified financial advisor and conduct their own research before making any investment decisions. The ultimate responsibility for any financial decisions made rests solely with the individual.
https://www.fool.com/investing/2023/04/09/why-shares-of-rocket-lab-usa-plummeted-102-in-marc/