Have Investors Missed the Liftoff in Rocket Lab (RKLB) Stock?

Rocket Lab USA (RKLB) stock has vastly outperformed the market over the past 12 months, having gained nearly 400%. While Elon Musk’s SpaceX remains privately held, the rapid rise in its reported value — at least in percentage terms — appears to have been matched by Rocket Lab, which is now worth in excess of $12 billion. While it’s a more speculative pick given its timeline to profitability, I’m bullish on the broad outlook for the aerospace sector, and Rocket Lab’s competitiveness in that space.

Can Rocket Lab Compete with SpaceX?

I’m bullish on Rocket Lab, and one of the reasons is its ability to compete with SpaceX, which dominates the space launch market. Rocket Lab’s Electron rocket has proven highly popular and its Neutron rocket — set to carry medium payloads beginning in 2026 — offers several compelling advantages that could carve out a significant niche in the industry.

First, analysts report that Neutron’s cost-effectiveness for dedicated launches in its payload class (up to 13 tons) will be superior to SpaceX’s Falcon 9 rocket. For payloads under 13 tons, Neutron provides more efficient launch costs per kilogram, making it an attractive option for many satellite operators. This cost advantage in its specific payload range could attract customers who don’t require the full capacity of larger rockets.

Second, Neutron offers greater flexibility in terms of launch timing and orbital insertion. While SpaceX’s rideshare program is cost-effective, it comes with limitations on launch schedules and orbits. Neutron’s dedicated launch capability gives customers more control over their mission parameters. Third, Rocket Lab’s reputation for precise orbital insertions could be a significant selling point for customers requiring accuracy. This precision, combined with the company’s track record with the smaller Electron rocket, may instill confidence in potential Neutron customers. This paints a very promising backdrop.

Rocket Lab’s Growing Segment

My bullishness also stems from the growing demand for satellite launches, with the market expected to reach $35.5 billion by 2033, suggesting there’s room for multiple players. More broadly, the space economy is projected to grow from $630 billion in 2023 to $1.8 trillion by 2035, driven by falling launch costs and advancements in space technologies. This suggests huge possibilities in the broader market.

Rocket Lab’s third quarter 2024 results reaffirm the surging nature of this segment. During the quarter, revenue grew by 55% year-over-year to $105 million, with total year to date revenues of $304 million. While the company continues to lose money due to high research and development (R&D) spending, Rocket Lab’s Electron rocket was the third most-frequently launched rocket last year, behind only SpaceX. With a backlog exceeding $1 billion and strong cash reserves, Rocket Lab is well-positioned for future growth in the expanding space industry.

Rocket Lab’s Valuation

Rocket Lab’s valuation is intriguing. The company currently has a market cap of $12.4 billion, reflecting strong investor confidence in its growth potential. Its enterprise value is also $12.4 billion, with debt and cash being pretty much equal. While traditional earnings valuations metrics are not applicable due to negative earnings, Rocket Lab’s forward price-to-sales ratio of 27.8 times is significantly higher than the sector median, indicating investors’ willingness to pay a premium for future growth.

Looking ahead, however, analysts expect earnings to go positive in 2026, with the price-to-earnings (P/E) ratio standing at 289 times. However, earnings growth is likely to be strong from there on, with the P/E ratio falling to 87 times in 2027. This projection, coupled with the expected 232.4% consensus earnings per share (EPS) growth rate for 2027, implies a potentially lucrative long-term investment opportunity for those willing to weather near-term volatility in this innovative space company.

Is RKLB Stock a Buy?

On TipRanks, RKLB comes in as a Moderate Buy based on seven Buys, five Holds, and zero Sell ratings assigned by analysts in the past three months. The average RKLB price target of $24.50 implies 0.1% upside potential. 

Read more analyst ratings on RKLB stock

Conclusion

I’m bullish on Rocket Lab as a compelling long-term investment, but accept there are some risks to my thesis. The company’s innovative Neutron rocket, strategic market positioning, and track record with precise orbital insertions offers a competitive edge against larger players such as SpaceX. With the space economy projected to grow exponentially, Rocket Lab is well-poised to capitalize and take a sizeable share of rising demand for satellite launches.

Although near-term challenges persist, including high R&D expenses and negative earnings, the backlog, decent balance sheet, and path to profitability by 2026 highlight significant growth potential. While the stock’s valuation reflects optimism, the expected earnings acceleration and market expansion probably justify the premium.