Rocket Lab stock is down 56% from its yearly high: Is this a buying opportunity?

Rocket Lab stock has slumped in recent months despite the company hitting several major milestones. Shares peaked at $150 in May before tumbling 56% to the current $65. This pullback could be a good buying opportunity, as a double-bottom pattern appears to be forming.

Rocket Lab has made some major milestones

RKLB, one of the top players in the space industry, is doing well as demand for its services continues rising. It has made some major contract announcements recently with organizations like the Space Force, Viasat, and MDA. 

Rocket Lab also announced the release of Inverted Metamorphic (IMM) Apex, which is the latest iteration of its next-generation solar cell designed to deliver efficiency and reliability for space applications. Brad Clevenger, the company’s president, said: 

“With IMM Apex, customers gain access to a high-efficiency, lightweight, germanium-free product that combines proven reliability with faster production times.

The company also announced strong financial results, which showed that its business continues to grow. Its revenue jumped by 62% in the second quarter to over $234 million. 

The revenue surge happened as its backlog soared to over $2.36 billion and management expects the surge to continue in the foreseeable future. For example, it expects its third-quarter revenue to come in between $250 million and $265 million, with its gross margin between 29% and 31%.

READ MORE: Cathie Wood buys $31.6M of Rocket Lab stock: is she betting the selloff went too far?

Analysts also expect that its revenues will come out stronger. The average estimate is that its annual revenue growth will be 59% to $958 million, followed by $1.36 billion next year. This revenue growth will be a 42% annual increase.

Rocket Lab has also delivered on other major milestones, including its $8 billion deal to acquire Iridium. The acquisition will give it highly sought-after spectrum and help unlock new markets. Specifically, Rocket Lab will gain access to the L-band spectrum, which could support additional services, potentially even a Starlink competitor.

Analysts are largely bullish on Rocket Lab shares. Berenberg initiated the coverage with a buy rating and a target of $83, much higher than where it is today. Bank of America’s Ronald Epstein has a target of $110, while Citizens’ Trevor Walsh has a target of $130. Some of the other top analysts with a bullish outlook on the company are from Cantor Fitzgerald, Citigroup, and Craig Hallum. 

Rocket Lab stock technical analysis

RKLB stock chart | Source: TradingView

The daily chart shows that the RKLB stock has retreated from a high of $150 in May this year to the current $65.87. It has dropped below the strong pivot/reverse level of the Murrey Math Lines tool at $75. 

The stock has slumped below 50-day and 100-day moving averages, a sign that bears are in control for now. On the positive side, the Relative Strength Index (RSI) has reversed and moved to 40, its highest level since August 24. 

The stock is also slowly forming a double-bottom pattern whose neckline is at $86.6, its highest point on August 10. A double-bottom pattern is a common reversal sign in technical analysis. 

Therefore, the stock will likely bounce back in the near term, with the next key target being the neckline at $86. A move above that level will point to more gains towards $100.