SpaceX vs Rocket Lab: What's the Better Buy Right Now?

Space Exploration Technologies (SPCX 0.99%), better known as SpaceX, is the hottest new space stock to own. It only began trading earlier this month, but with a market cap of around $2 trillion, it's already among the most valuable stocks in the world due to its massive growth opportunities.

But what about a smaller player in the industry, such as Rocket Lab (RKLB 5.15%)? At a fraction of the size, with a market cap of around $60 billion, it may also stand to benefit significantly from greater investor interest in space stocks. Which one is the better buy today: SpaceX or Rocket Lab?

SpaceX has a compelling growth story and strong retail interest

Although SpaceX has a significant market cap already, investors don't appear to be overly concerned simply because of the massive growth potential the company has. In addition to space travel, SpaceX plans to be a leading company in artificial intelligence (AI), sending data centers into space. And its Starlink business is so promising that it has telecom investors worried about disruptions in that industry as well.

Plus, with Elon Musk as its CEO, SpaceX has that "it" factor that can enable it to trade at a higher valuation than what its fundamentals may justify. This is a company that incurred more than $4 billion in losses during the first three months of the year and is burning through cash at a rapid pace. And yet, investors don't appear concerned. While the stock has declined in recent days, it isn't exactly crashing the way some investors and analysts may have expected; there appears to be support for the stock at its current valuation, even though its fundamentals are by no means robust.

With plenty of growth opportunities and significant interest from retail investors, SpaceX's stock may continue to be a hot buy this year, even if its fundamentals don't exactly support its high price.

Rocket Lab is a cheaper option with a potential growth catalyst on the horizon

Rocket Lab isn't as diverse as SpaceX, as its focus is on space. It isn't profitable either, but with losses totaling $183 million over the trailing 12 months, they pale in comparison to SpaceX. From a valuation perspective, the stock also trades at around 80 times its revenue, which is lower than the multiple of more than 100 that SpaceX trades at.

The company generated strong growth in its most recent quarter, with quarterly revenue hitting a new record of over $200 million, rising by just under 64% year over year. Rocket Lab is also a trusted partner of the U.S. government, as it has secured over $1.3 billion worth of contracts thus far with the U.S. Space Development Agency.

Later this year, the company plans to launch its larger Neutron rocket, which could open up greater opportunities for the business in the near term. It can carry payloads of up to 13,000 kg to low-Earth orbit, which is far more than the roughly 300kg its smaller Electron rocket can transport. A successful launch of Neutron could lead to Rocket Lab's stock also taking off.

Which stock is the better buy today?

Both of these stocks are expensive and involve some risk due to their lack of profitability. SpaceX stock is compelling because it's more diversified and it has more varied growth opportunities than Rocket Lab. However, with a lower valuation, Rocket Lab may also have more room to rise higher.

While normally I might go with the better value buy, if I were picking between these two stocks, I'd go with SpaceX. Whether you're paying 80 times revenue or 100 times revenue, the premium is significant either way. Plus, the extra premium may well be justified given the larger, more diversified business you're getting with SpaceX and its visionary CEO, who has demonstrated a masterful ability to grow businesses over the years.