What happened
The pristine two-year track record of successful launches by Rocket Lab USA (RKLB 3.29%) went up in smoke in September, and the rocket wasn't the only thing that crashed. Shares of Rocket Lab fell 30.6% for the month, according to data provided by S&P Global Market Intelligence, as investors recalibrated the company's trajectory.
So what
Rocket Lab has established itself among other space stocks thanks to its ability to reliably launch payloads into space. But rocket science is hard, and eventually all companies must deal with setbacks.
In September, an Electron rocket launched from the company's New Zealand complex experienced an issue 150 seconds into its flight that forced Rocket Lab to terminate the mission. The rocket and its payload were both destroyed, sparking an automatic Federal Aviation Administration investigation as well as an internal company probe.
Days after the incident, Rocket Lab lowered its guidance for third-quarter revenue to $66 million to $68 million from $73 million to $77 million, projecting sales that would fall below the consensus $74.5 million estimate. The adjustments were the result of Rocket Lab postponing future missions while the anomaly is investigated.
Rocket Lab also lowered its gross margin estimates.
The launch was Rocket Lab's 41st mission. The company has previously launched 171 satellites successfully, although it did experience a launch failure in 2021.
Now what
The termination is unfortunate, and the ramifications could take some time to be fully known. Despite its strong track record coming into September, Rocket Lab was a speculative stock, and the incident, if nothing else, highlights exactly what can go wrong from here.
That said, one incident is not going to be the end of Rocket Lab. Rocketry is a high-profile trial-and-error endeavor, and all who try it eventually experience errors. Rocket Lab's success rate is still higher than most of its rivals, and the company remains a trusted partner for those in need of a lift.
The Electron rocket is Rocket Lab's mainstay today, but the company hopes to bring the next-generation Neutron into service in early 2024. Rocket Lab is also a lot more than just a launch company, getting about two-thirds of total revenue from building and maintaining satellites and other equipment for customers.
Investing in space requires a lot of hope -- and even more patience. The potential for Rocket Lab remains, but in September, investors got a cold, hard look at the downside should things not go to script.
