By Al Root
Rocket Lab stock rose again Tuesday, following its blockbuster announcement on Monday that it would buy satellite operator Iridium Communications.
Now, Wall Street is weighing in on the deal as investors look for other companies that have assets needed to build space-communications networks.
Rocket Lab stock rose 3.8% to $101.65, while the S&P 500 and Dow Jones Industrial Average added 0.8% and 0.3%, respectively.
The move followed on Monday's massive 15.9% gain, which came after Rocket Lab agreed to buy Iridium for $54 a share, turning Rocket Lab into a mini- SpaceX, with the ability to launch rockets, build satellites, and operate a communications network in space. (SpaceX's profitable Starlink space-based broadband product generates billions of dollars in annual profits.)
Wall Street likes the deal. Citizens analyst Trevor Walsh raised his Rocket Lab stock price target to $130 from $95. Roth Capital analyst Suji Desilva raised his price target to $130 from $100. Both analysts rate the shares Buy and see a compelling strategic rationale for the deal.
Overall, the average analyst price target for Rocket Lab shares is about $120, up $3 since the deal was announced, according to FactSet. A year ago, the average price target for Rocket Lab stock was only $32 a share. It's been a good year for many space stocks.
It's been a good year for satellite companies, too. Coming into Tuesday trading, Viasat stock was up 425% over the past 12 months after a 24% rise on Monday. Shares were up on the Iridium deal, with investors realizing that satellite and wireless spectrum were becoming more valuable.
"We met with Iridium's CEO Matt Desch at the Satellite Show in March, and [wireless] spectrum was the main topic of conversation," wrote William Blair analyst Louie DiPalma on Monday. Spectrum are the frequencies over which wireless calls and data travel. Just as two local radio stations can't broadcast on the same frequency, wireless operators need their own channels.
"While spectrum is the central asset, Iridium brings much more to the table for Rocket Lab than just spectrum," added DiPalma. "Iridium's additional resources include its new alternative position navigation and timing (APNT) ASIC, standard-based narrow-band non-terrestrial networking (NB-NTN), ADS-B flight tracking via Aireon, satellite voice, and several major Department of Defense (War) contracts."
EchoStar, which sold wireless spectrum to SpaceX, is valued at about $29 billion, up about 260% over the past year.
Earlier this year, Amazon.com agreed to buy Globalstar for about $12 billion.
Shares of satellite operator AST SpaceMobile rose 21% on Monday. That left the company with a market value of about $34 billion. Viasat is worth closer to $10 billion. The Rocket Lab deal valued Iridium stock at about $6 billion.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.