Rocket Lab (RKLB +3.48%) stock fell 13.7% in February's trading amid valuation pressures impacting the broader market. The S&P 500's level declined 0.9% in the month, and the Nasdaq Composite's level fell by 3.4%.
Rocket Lab's valuation got a double-digit haircut last month as investors broadly reduced exposure to growth-dependent tech stocks in response to pricing concerns and reacted to new macroeconomic data and developments. The company's fourth-quarter report at the end of the month also drove a sell-off for the stock.
Image source: Getty Images.
Rocket Lab slipped last month despite a strong Q4 report
Rocket Lab published its fourth-quarter results after the market closed on Feb. 26, reporting sales and earnings that beat Wall Street's targets. The business recorded a loss of $0.09 per share on sales of $179.65 million in the quarter, beating the average analyst estimate's target for a per-share loss of $0.10 on sales of $178.18 million.
Rocket Lab posted another period of strong growth, with revenue increasing nearly 36% year over year and the company's non-GAAP (adjusted) gross margin improving to 44.3% from 32% in the prior-year period. The business's gross margin for the year came in at 39% for the year -- up from 32% in 2024.
NASDAQ: RKLB
Key Data Points
In conjunction with its Q4 report, Rocket Lab also issued guidance for the current quarter and guided for sales between $185 million and $200 million. The company's sales target came in well above the average analyst estimate's call for sales of roughly $180.9 million, but some investors weren't happy with management's guidance on margins.
Rocket Lab expects to post an adjusted gross margin between 39% and 41% in the current quarter, which suggests that investors will have to wait for additional margin improvements after Q4's strong gains. Despite sell-offs for the stock after earnings, the quarterly report was a strong one for the company and suggests its growth story is still on track.
Rocket Lab has seen a modest gain in March
On the heels of last month's sell-off, Rocket Lab has managed to regain a bit of ground this month. As of this writing, the stock is up 1.3% in March.
While unfolding developments in the U.S. and Israel's war with Iran have caused volatility for many stocks, Rocket Lab has managed to inch higher. In addition to providing launch services for consumer telecommunications and other applications, the company also provides services to support defense industry applications -- and some investors may be betting that geopolitical instability could spur demand. The stock also got a boost from a report showing stronger-than-expected private-sector hiring in February.
Trading at roughly 46.6 times this year's expected sales, there's a lot of strong growth already priced into Rocket Lab's valuation. On the other hand, the company has been executing at a high level and seems to have a long runway for expansion amid the rapidly evolving space economy.
