Rocket Lab USA (RKLB +1.95%) stock went on an incredible run in the last 12 months. Some may say it even went to the moon. Shares went from around $4 in the spring of 2024 to breaching $30 in January of this year, a more than 7x gain in less than a year. Investors went from pessimistic to optimistic on this upstart competitor to SpaceX as it launches more rockets and builds on its capabilities as an end-to-end space economy platform.
Now, investors have turned pessimistic again. Some analysts estimate that the company's highly anticipated Neutron rocket will not be ready in 2025 as management currently claims, which is likely why Rocket Lab's stock has fallen so much in just the last few weeks. With share prices now down 40% from recent highs, does that make Rocket Lab stock a buy right now?
Reliable rocket launches
Like SpaceX a decade ago, it's almost a miracle that Rocket Lab is a viable business. Building a private space flight company is incredibly difficult. Launching a rocket into space is a complicated pursuit, and if your rockets go through catastrophic failure and blow up a customer's products even once, you risk ruining your brand reputation.
All this to say, Rocket Lab is now the second private company in North America to reliably launch rockets for commercial and government contractors. It attacked the market by focusing on small payloads with its Electron rocket, a niche that SpaceX does not serve. In 2024, the Electron rocket launched 16 times with a 100% mission success rate. In 2025, Rocket Lab hopes the Electron project gets even more missions.
To further its offering for customers, Rocket Lab has rapidly developed a Space Systems segment that helps build the products launched on its Electron missions for customers (as well as third parties such as SpaceX). Space Systems revenue was $311 million in 2024, up from $172.7 million in 2023. Combined, the two segments generated $436 million in revenue last year, up from less than $100 million just a few years ago. Rocket Lab is one of the fastest-growing companies in public markets today.
NASDAQ: RKLB
Key Data Points
Rumblings over Neutron rocket delays
Rocket Lab's growth has been nothing short of phenomenal. However, bulls on the stock will tell you that this growth party is just getting started. In 2025, management says it will debut and test flight its new Neutron rocket, which is significantly larger than the Electron. Larger payloads mean a more complicated launching system but should allow the company to generate much more revenue per launch. Reports are that Rocket Lab will charge customers at least $50 million per Neutron launch compared to under $10 million for the Electron.
The stock has run higher due to the anticipation of the Neutron debut. Some bears say the company is getting too aggressive with its development timeline, though. With the full rocket system not built yet and its landing/launching infrastructure not finished, analysts such as Bleecker Street Capital believe the Neutron deployment will be delayed until 2026 or 2027. With large development costs, this could cause Rocket Lab to burn a ton of cash and require them to raise more money through stock or debt offerings, which would drive down the stock price.
Data by YCharts.
Should you buy Rocket Lab stock?
Past execution has been strong, and the company has now built a good reputation with investors and customers. It is reliably launching Electron rockets and successfully expanding its Space Systems division. However, there is still a ton of uncertainty over the Neutron rocket.
The company is at a crossroads. If the Neutron development isn't delayed, Rocket Lab will likely keep growing its revenue at a rapid pace and see a nice profit inflection. We haven't even mentioned its next business model plan of building its own satellite constellation that can sell software services to third parties. Like Starlink at SpaceX, this could prove highly lucrative for Rocket Lab if they build it.
I don't think Rocket Lab's stock is a buy right now. Why? Because it doesn't properly account for the downside potential of a delayed Neutron rocket debut. At a market cap of $9.5 billion, the stock price suggests that Neutron's success is a guarantee. Rocket launching is a low-margin business. Even if Rocket Lab's revenue boomed higher to $2 billion and garnered a 20% profit margin, that is just $400 million in earnings. Or, a forward price-to-earnings ratio (P/E) of 24. Remember, these earnings are not guaranteed and would not materialize for many years into the future.
Today, the company is generating less than $500 million in revenue and losing close to $200 million a year. From my vantage point, it is best to keep Rocket Lab stock on the watchlist for now despite this 40% drawdown in 2025.
