Freedom Broker believes that aerospace company Rocket Lab could be the main beneficiary of the conflict between billionaire Ilon Musk and US President Donald Trump. After the stream of mutual accusations they hurled at each other the day before, Trump threatened to tear up multi-billion dollar contracts with Musk's companies, including SpaceX. Rocket Lab is its competitor
Details
Tense relations between Donald Trump and Ilon Musk create a favorable environment for Rocket Lab, analysts at Freedom Broker wrote in a note available at Oninvest. This aerospace company acts as an attractive alternative to Musk's SpaceX - for NASA, the Pentagon and other U.S. agencies, they believe.
Rocket Lab specializes in building and launching small and medium-lift rockets. Its lightweight Electron carrier has already proven its reliability and responsiveness - it has been regularly launching micro-satellites into orbit since 2018, including for government clients. And the heavy-lift Neutron, being in the final stage of development, is capable of taking over some of the cargo for national security programs, Freedom points out.
The first launch of Neutron will take place in the second half of the year, a project that the broker's analysts call a key driver of the company's growth in the medium term. In case of a successful launch, Rocket Lab is likely to receive new contracts from the U.S. government, they wrote.
If the conflict escalates and Trump does break off relations with SpaceX, Rocket Lab shares will get a strong short-term upward momentum, Freedom predicts. And even if there is a reconciliation, the scales for choosing a contractor for future projects may, in their opinion, shift in favor of this company.
Freedom Broker recommends buying shares of Rocket Lab with a target price of $32, it suggests a potential upside of 20% from current levels.
What happened
Ilon Musk has publicly criticized Donald Trump several times this week for the budget reform he is pushing, which among other things involves eliminating tax credits for the purchase of electric cars. On June 5, this confrontation escalated: the president reacted to Musk's statements for the first time, and an altercation began on social media, during which Trump stated that the easiest way to save billions of dollars in the U.S. budget would be to "end government subsidies and Ilon contracts."
Tesla, to whose shares much of Ilon Musk's fortune is tied, and his space company SpaceX have benefited greatly from government contracts, reports Bloomberg. Since fiscal 2000, they have received $22.5 billion in unclassified federal contracts, according to Bloomberg Government data.
An agency source familiar with the situation in SpaceX, the day before called unlikely that the tense relationship between Musk and Trump will have an immediate negative impact on the company. He believes SpaceX has a dominant position in the space launch market, and competitors are struggling. However, the Bloomberg interviewee noted that there is discontent in the company because of the damage to the brand: first from Democrats, who were angered by Musk's rapprochement with Trump, and now from Trump supporters in Washington, who are likely to side with the president.
Freedom analysts don't rule out that SpaceX could come under regulatory pressure and risk temporary suspension or delays in government contracts.
