Lifting Our Rocket Lab Price Target Following Near-Parabolic Breakout

We've got new target prices for RKLB and SoFi Technologies ahead of earnings as these small-cap names celebrate great victories.

Author:
Stephen Guilfoyle
Publish date:
Oct 21, 2024 10:00 AM EDT

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While I was out last week, a couple of our former core "Stocks Under $10" names ran wild so, though I have written on them recently, I think an update is required.

Those two stocks would be SoFi Technologies (SOFI) and Rocket Lab USA (RKLB) . A third core name, Palantir Technologies (PLTR) , ran higher the week before last, apexing at $44.38. Last week, that stock (our absolute fave) did some necessary basing, and surrendered 1.24% to $42.97, still up 150% year to date. We put a $48 target price on that name back on October 3, so we'll leave that one alone going into earnings on November 4.

SoFi Technologies (SOFI)

On October 9, we reiterated our target price of $10.25 for SoFi Technologies, while adjusting our add and panic points. The last sale was $8.50 at the time. The shares traded as high as $10.49 last week and closed on Friday at $10.18. SOFI will report the firm's fiscal third quarter a week from Tuesday after having raised full-year guidance in June. Wall Street is looking for a GAAP EPS of $0.04 on revenue of $632 million. If those numbers prove to be exact, this will be the firm's fourth consecutive quarter of profitability, while also reflecting revenue growth of 19%.

Of the ten (up from nine) sell-side analysts that I know of who follow this stock, all ten have increased their Q3 earnings estimates for this name since the third quarter started. Late last week, analyst Andrew Schmidt of Citigroup, who is rated at three stars out of five by TipRanks, reiterated his "buy" rating on these shares, while increasing his target price to $12.50 from $11.

When we wrote on the stock almost two weeks ago, the breakouts from this falling-wedge pattern and from that double-bottom reversal pattern were still somewhat in doubt. It's okay to take a smidgen of profits belatedly due to our target being exceeded if one did not already do that on general principle. That said, I'm not reducing my long position size materially.

My current expectation is for SOFI to enter into a basing period of consolidation with a pivot point of that $10.49 high made last week. Call it $10.50 if you like. That, of course, will take our target price substantially higher as well.

Target Price: $13.25 (up from $10.25)
Pivot: $10.50 (up from $8.30)
Add Some: Down to 50-day SMA (currently $7.90)
Panic: On a loss of both the 50-day and 200-day SMAs

Rocket Lab USA (RKLB)

This one's a beauty, isn't it? On September 19, I took our target price to $9.50, up from $7.50 with the stock trading at $7.13. On September 27, I canceled our $9.50 target price with the stock trading at $9.94. I did inform readers that, while not being able yet to determine a new target price, I was remaining long the vast majority of my position after making a token sale. Last week, Rocket Lab USA peaked at $11.19 and closed on Friday at $10.81. Yowza, yowza, yowza!

Between September 19 and September 27, five-star rated (by TipRanks) analyst Philip Gibbs of KeyBanc had reiterated his "buy" rating on the stock, while increasing his target price from $8 to $11. Since then, the firm had been selected by NASA to complete a study for retrieving rock samples from the Martian surface and bringing them back to Earth to study for the first time.

Earnings are due on November 12. For the firm's third quarter, Wall Street is looking for a GAAP EPS of $-0.10, adjustable to $-0.08 on revenue of $102.4 million. Prints such as those would be good for year-over-year revenue growth of 51%. Revenue growth of more than 100% is expected for the fourth (next) quarter.

Here, we have a near parabolic breakout from an Andrews' pitchfork pattern that followed a breakout from a falling-wedge pattern. In order to put some direction in our trade, I am going to go out on a limb going into earnings and say that these shares need to base or consolidate as much as shares of SOFI do. I am going to place the pivot at last week's top and look for support around the $9 level, to hopefully form that base.

Target Price: $14
Pivot: $11.20
Add: Down to the 50-day SMA (currently $7.70)
Panic: Loss of the 200-day SMA (currently down at $5.30, now well above our net basis of $4.26)