Evaluating Rocket Lab (RKLB) and Navitas Semiconductor (NVTS): Which Stock Offers Better Safety and Returns?
Investors are always on the lookout for opportunities in innovative sectors like space exploration and advanced semiconductors. Today, we're diving into two intriguing players: Rocket Lab USA (RKLB), a leader in small satellite launches and space systems, and Navitas Semiconductor (NVTS), a pioneer in gallium nitride (GaN) power chips for AI, EVs, and more. Both companies are in high-growth but high-risk phases, with current losses but promising futures. Based on recent valuations and market data as of July 2025, I'll break down their stock price estimates using methods like Discounted Cash Flow (DCF) and relative valuation, then compare them on safety and potential returns over the next year.
Spoiler: Neither is a "safe" bet like a dividend aristocrat, but one edges out the other.
This analysis draws from financial metrics, analyst forecasts, and market sentiment to help you decide if either fits your portfolio. Remember, investing involves risks, always do your due diligence or consult a financial advisor.
Understanding Stock Valuation Basics
Before we jump in, a quick primer on how we calculate estimated stock prices (intrinsic value) versus market prices:
- Discounted Cash Flow (DCF): Projects future free cash flows, discounts them to present value using a rate like Weighted Average Cost of Capital (WACC), and divides by shares. It's forward-looking but sensitive to assumptions like growth rates.
- Relative Valuation (e.g., Price-to-Sales or P/S): Compares metrics like revenue to peers' multiples. Useful for unprofitable companies.
Market prices can deviate from these due to hype, news, or sentiment. Now, let's apply this to our stocks.
Rocket Lab USA (RKLB): Launching into the Future?
Rocket Lab has been making waves in the space industry with its Electron rocket and upcoming Neutron medium-lift vehicle. As of July 18, 2025, shares traded at $51.39, reflecting optimism around contracts and the booming satellite market.
DCF Valuation for RKLB
Using analyst projections and conservative assumptions (e.g., 70% growth post-2026, 10% discount rate, 5% perpetual growth):
| Year | Revenue ($M) | Op. Margin | FCF ($M) | PV of FCF ($M) |
|---|---|---|---|---|
| 2025 | 573 | -5% | -114.65 | -104.23 |
| 2026 | 890 | 10% | 0 | 0 |
| 2027 | 1,513 | 25% | 162.65 | 122.20 |
| 2028 | 2,572 | 35% | 546.55 | 373.20 |
| 2029 | 4,372 | 40% | 1,180.44 | 732.80 |
- Terminal Value PV: ~$15,390M
- Equity Value: ~$16,451M (after net debt adjustment)
- Estimated Price: $34.32/share
This suggests overvaluation at current levels, but bull cases with higher growth could push it to $45+.
P/S Relative Valuation
Peers like Astra and Virgin Orbit imply a forward P/S of ~11.4x. With 2026 revenue per share at $1.86: $21.20/share.
Analyst target: $30.21, hinting at 41% downside. Yet, catalysts like Neutron's 2025 launch could drive upside.
Navitas Semiconductor (NVTS): Powering the AI Boom?
Navitas focuses on efficient GaN tech, riding the AI data center wave. Shares were at $6.79 on July 18, 2025, but near-term revenue dips loom.
DCF Valuation for NVTS
Assumptions: 40% growth post-2026, 12% discount rate, 4% perpetual growth.
| Year | Revenue ($M) | Op. Margin | FCF ($M) | PV of FCF ($M) |
|---|---|---|---|---|
| 2025 | 64 | -10% | -7 | -6.25 |
| 2026 | 96 | -7% | -2.88 | -2.29 |
| 2027 | 134 | 20% | 10.72 | 7.61 |
| 2028 | 188 | 30% | 31.02 | 19.46 |
| 2029 | 263 | 35% | 55.89 | 31.70 |
- Terminal Value PV: ~$412M
- Equity Value: ~$525M (with net cash)
- Estimated Price: $2.73/share
External models echo this, with fair values around $2.30–$3.73.
P/S Relative Valuation
Peers (e.g., Wolfspeed) at ~8x forward P/S: With $0.50 revenue/share, $3.98/share.
Analyst target: $4.31, suggesting 36.5%. Hype from Nvidia ties could spark rallies, though.
Safety Showdown: RKLB Takes the Crown
Safety isn't these stocks' strong suit—both have betas over 2, negative earnings, and sector risks. But RKLB wins:
- Lower beta (2.09 vs. NVTS's 2.96) means less wild swings.
- Stronger cash reserves ($428M vs. $75M) and lower debt ratio buffer against downturns.
- Momentum: RKLB's backlog and launches provide visibility; NVTS faces cash burn and semi cycles.
NVTS is riskier with bearish sentiment and dilution fears.
One-Year Return Potential: Bet on RKLB for Upside
Over the next year, RKLB looks poised for better returns:
- Catalysts like Neutron and revenue doubling could yield 20–50% gains.
- NVTS might see 10–30% in an AI boom but risks more downside (36% implied).
RKLB's recent highs and positive X buzz support this.
Final Thoughts: High-Risk, High-Reward Plays
If you're risk-tolerant and believe in space's long-term boom, RKLB offers relative safety and stronger near-term returns. NVTS could surprise in AI, but it's the underdog here. Both appear overvalued per valuations, so time entries wisely.
Disclaimer: This is not financial advice. Stock prices fluctuate, and past performance isn't indicative of future results.
What's your take? bullish on space or semis? Drop a comment below!
