In the previous year, Rocket Lab USA achieved significant milestones within the aerospace industry, marking it as a record year for the company. Its Electron rocket remained a crucial asset, positioning Rocket Lab as a major player in the small satellite launch market and the second-largest launch provider in the United States, following SpaceX. The company is also advancing the development of its larger launch vehicle, which is expected to enhance its capabilities and support a wider array of missions.
Over the past year, Rocket Lab’s stock experienced a remarkable 480% increase, resulting in a high valuation. An examination of the company and its growth potential is warranted to determine its investment viability at present.
Rocket Lab USA has solidified its role as a key partner for organizations aspiring to launch small satellites into orbit. Through its Electron rocket, the company offers frequent and economical missions for clients with smaller payload requirements. The previous year stood out as a successful period for Rocket Lab, with the completion of 16 launches, signifying a 60% growth in comparison to 2023.
In addition to its launch services, Rocket Lab has established a strong space systems business, offering spacecraft engineering, design services, components, and manufacturing, among other services. The synergy between its two business arms has contributed to an increase in revenue, with a 65% growth, reaching $304 million through the first three quarters of the past year. Gross profit more than doubled to $79 million, but significant expenses in research, development, and administration led to an operating loss of $138 million during the same timeframe.
Despite progress, Rocket Lab faces significant competition from SpaceX, the current leader in the market. SpaceX completed 134 orbital launches in the past year with its Falcon rockets. The capability to carry heavier payloads gives SpaceX a notable advantage, with Falcon 9 supporting up to 13,000 kilograms and the Falcon Heavy over 66,000 pounds, compared to the Electron’s capacity of 660 pounds.
To bridge this gap, Rocket Lab is developing the Neutron rocket, intended to compete with the Falcon 9, with a comparable payload capacity of 28,600 pounds. The Neutron is projected to generate $50 million to $55 million per launch, significantly more than the Electron.
In August, Rocket Lab tested its Archimedes engine for the Neutron vehicle at NASA’s Stennis Space Center, with plans to introduce the Neutron by mid-2025. The company maintains strong demand for its launch services, including a recent deal with a Japanese Earth imaging company for missions in the coming years. Rocket Lab reported a backlog of over $1 billion for future launches, indicating robust demand.
While Rocket Lab’s stock reflects investor optimism due to its growth prospects and enhanced launch cadence, it trades at a high valuation, nearly 38 times trailing-12-month sales. Although revenue is forecasted to reach $605 million in 2025, profitability is not expected until 2026. The stocks trade at 23 times forward sales based on these estimates.
The development of the Neutron rocket represents a significant turning point for Rocket Lab. However, any potential delays or deviations from expected launch schedules could affect revenue and lead to volatility, especially given the current stock price. Rocket Lab may appeal to aggressive, growth-focused investors interested in the emerging space economy and willing to navigate the inherent volatility while the company cements its position in the market.
