While market crashes can undoubtedly be scary, they also offer fantastic opportunities for Stocks and Shares ISA investors.
For evidence, just look at April’s meltdown. In a matter of days, many high-quality stocks lost 20%-40% of their value, before surging to new highs once markets recovered.
Indeed, the recovery has been so swift and dramatic that some are predicting another crash could be on the horizon!
Ultimately, nobody knows whether a crash will happen soon. After all, if this was suddenly known in advance, the crash would happen now. But in my experience, it pays to have a list of stocks ready to buy when markets go south.
Here’s one that’s on mine right now.
A mini-SpaceX
Everyone has probably heard of SpaceX (short for Space Exploration Technologies Corp), the reusable rocket pioneer founded by Elon Musk. It absolutely dominates the launch market, successfully completing more than half of all global launches in 2024.
Unfortunately, humble ISA investors like myself can’t buy shares of SpaceX because it’s still a private company. That’s a shame, as the company’s valuation has rocketed — for want of a better word — over the past decade. A roughly 35 times increase in value!
But here’s a quick quiz question: who is America’s number-two rocket launcher behind SpaceX? Not as many people know this.
The company in question is Rocket Lab (NASDAQ:RKLB). Its small-lift Electron rocket has delivered more than 200 satellites to orbit for private and public sector organisations.
Electron has gone from six launches in 2021 to 16 last year. And it’s on course to beat that figure this year, with further missions booked with a Japan-based Earth imaging company next month.
As well as rockets, the firm designs and manufactures satellites and spacecraft components. Indeed, its spacecraft have been selected to support NASA missions to both the Moon and Mars, as well as the first private commercial mission to Venus.
Before the end of 2025, it plans to test a larger, partially reusable rocket called Neutron, which is intended to compete with SpaceX’s Falcon 9.
Why wait?
Rocket Lab is growing rapidly. Last year, revenue jumped 78% to $436m, and Wall Street sees revenue increasing to more than $2bn by 2030. The company is forming a new payloads division, strengthening its position for future defence satellite contracts.
This all sounds great. So, why don’t I just buy the stock right now? Well, the main problem I have is the valuation after a 460% share price surge in the past year.
Currently, the stock is trading at 52.5 times sales. That’s a very steep multiple.
Moreover, space is highly capital-intensive, meaning that Rocket Lab isn’t yet profitable (a loss of around $220m is forecast for this year). Supply chain issues also add risk in the near term, while a major Neutron test flop might dent investor confidence.
Despite these risks, I’m keen to add the stock to my portfolio at some point. If Neutron is successful, it would enable the company to compete for satellite mega-constellation launches, dramatically expanding its total addressable market (and profit potential).
Also, the US government is looking to reduce reliance on SpaceX for launch services, which should directly benefit Rocket Lab.
Now, I just have to wait patiently for a better price to buy the stock…
