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a day ago
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Clamoring to Invest in SpaceX but Can't? Consider Buying Stock in This Competitor That Just Upped Its National Defense Game.
Rocket Lab has a lot of similarities to SpaceX. Its government relationships and new Neutron rocket can drive revenue higher. Similar to SpaceX, Rocket Lab is valued at an expensive multiple to its sales. 10 stocks we like better than Rocket Lab › SpaceX is the most valuable privately held company in the world, estimated to be worth $350 billion. Too bad you cannot buy its shares on the stock market today. All the gains and value generated by SpaceX have been reserved for insiders, venture capitalists, and the company's employees. Seeing these gains without being able to get in on them might be frustrating for investors who don't have access to the venture capital market. All may not be lost, though. If you truly want to invest in SpaceX, a copycat business in Rocket Lab (NASDAQ: RKLB) may be for you. Here's why anyone clamoring to buy SpaceX stock should seriously consider Rocket Lab for their portfolio instead. Rocket Lab is a niche space company, but one that is nipping on SpaceX's heels. It is the only other company to reliably launch rockets for customers at scale, with its Electron program consistently launching for customers every quarter. The company has won contracts from commercial and government buyers because of how small the Electron rocket is. SpaceX's systems are not meant for a nimble or small payload, which is how Rocket Lab attacked the market previously monopolized by SpaceX. These capabilities have allowed Rocket Lab to win contracts for national defense systems such as HASTE (Hypersonic Accelerator Suborbital Test Electron), which helps the government test hypersonic defense capabilities. These reliable contracts are only growing, with huge potential for more government spending on space defense in the years to come. For example, the proposed Golden Dome missile defense system is expected to cost $175 billion, and Rocket Lab is in a prime position to win contracts associated with this program if it comes into being, as well as many others. A relationship with the U.S. government for national defense priorities could be quite lucrative for Rocket Lab as it tries to take the next steps as a business. This is why it just acquired Geost -- a satellite laser operator -- for $275 million. Looking ahead, Rocket Lab is preparing for a future in which it more directly competes with SpaceX rockets via its Neutron rocket, which will be much larger than the Electron and have a similar payload to SpaceX's Falcon 9 rocket system. Rocket Lab is currently testing the Neutron and hopes to be ready for commercial launches next year. An operational Neutron rocket could lead to a massive boost for Rocket Lab's business. It already has a proposed contract for two missions for a unnamed customer in 2026 and was signed onto the U.S. National Security Space Launch (NSSL) program, which is expected to spend $5.6 billion through 2029. This is a huge greenfield opportunity for Rocket Lab. The company already has a great reputation for safe launches, which will hopefully lead the company to win contracts for the Neutron as well. It will also help the company sell more of the space systems that it builds for its launch customers, a double whammy of revenue growth for the business. Today, Rocket Lab's backlog sits at just over $1 billion. If the Neutron can start safely launching for customers, we could see huge growth in the size of Rocket Lab's backlog throughout the rest of the decade. SpaceX is estimated to have a price-to-sales ratio (P/S) of around 27, which is quite expensive. The average stock in the S&P 500 has a P/S ratio of 3, which takes the market cap and divides by trailing-12-month sales and is a metric used often when a company has no earnings. Rocket Lab is in a similar boat to SpaceX. It has a P/S ratio of 28.5, which has grown as the stock has soared in the last 12 months. Rocket Lab may grow into its valuation if the Neutron is successful and revenue goes up tenfold over the next 10 years. However, the company has an expensive-looking P/S ratio today and has never made a profit. This makes it a risky gambit to put your money in. If you really want to invest in the space economy, Rocket Lab is a good way to play this trend. However, the stock is expensive and does not come without risks. Before you buy stock in Rocket Lab, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Rocket Lab wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $868,615!* Now, it's worth noting Stock Advisor's total average return is 792% — a market-crushing outperformance compared to 171% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 2, 2025 Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Lab USA. The Motley Fool has a disclosure policy. Clamoring to Invest in SpaceX but Can't? Consider Buying Stock in This Competitor That Just Upped Its National Defense Game. was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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3 days ago
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Big Dreams, Bigger Risks: Rocket Lab's Neutron Bet Faces Market Gravity
Shares of Rocket Lab (NASDAQ:RKLB) rallied immensely after the first-half decline in 2024, supported by both the business surrounding the neutron mission and contracts with governments. The stock is now 544% up over past 52-weeks. Earlier in the month, the space company reported strong Q1 findings, highlighted main achievement points and confirmed the company's key strategies. However, the company's share price dropped about 12% after it issued soft guidance and the earnings release. I think many ignore how strong Neutron will be in 2025, so I see this as knee-jerk selling. Neutron, a cheaper and reusable rocket, gives Rocket Lab an edge over SpaceX and has already helped the firm begin supplying services to government agencies. For instance, the U.S. Space Force picked Northrop Grumman to participate in the $5.6 billion third phase of its National Security Space Launch program, having selected only five companies. It also won contracts for its HASTE hypersonic vehicle in the U.S. and U.K. programs worth tens of billions. Besides moving into other segments, the company revealed it will buy Mynaric (a laser-communication provider) and develop more advanced satellites, showing their focus on growing in space infrastructure. In addition, Rocket Lab is growing much more quickly than SpaceX, launching nearly 60% more in 2024 than in 2023, which gives it an edge in the space market. Rocket Lab is teaming up with the U.S. Air Force to build its new Neutron rocket, which could transform Rocket Lab and the whole space industry. Neutron is 43 meters high, its diameter is 7 meters, and it is capable of transporting 13,000 kg to low-Earth orbit. The Archimedes engines allow it to lift off by creating 480,000 kg of thrust. I am especially amazed by how much the spacecraft is expected to cost when it launches, at $5055 million. In comparison, SpaceX's Falcon 9 costs around $67 million for every launch and it can accommodate 22,800 kg, set at about $3,000 per kilogram. Neutron is cheaper for each launch, but it costs about $4,000$4,300 per kilogram, so it is less cost-effective. Even so, Neutron has some additional strengths. It is suitable for frequent medium-lift missions such as those needed for the Kuiper satellite constellation operated by Amazon (AMZN). Having a reusable rocket and built-in fairings means the process can be performed faster, saving money. Although Falcon 9 is built for many missions, Neutron concentrates on getting to orbit as quickly as possible and reliably. Being able to make most of their own parts at Rocket Lab helps control their budget and maintain a high standard of quality. Because it has launch sites in the U.S. and New Zealand, the company is able to provide more options for when customers can book a launch. Usually, the cost plays a big role in deciding when to launch, and Neutron's more affordable price might appeal to many users. I also like that it can be used again, which should boost Rocket Lab's earnings as it improves how to collect them. Being picked for the NSSL list on a $5.6 billion indefinite delivery, indefinite quantity (IDIQ) contract until 2029 from the U.S. Space Force is a strong vote of confidence in Neutron's abilities. When the launch starts next year, I expect investor interest to rise. If Rocket Lab successfully scales Neutron launches, it could generate about $787.5 million in annual revenue by flying 15 rockets a year at an average $52.5 million per launch (15 $52.5 million = $787.5 million). Assuming a conservative 5 % net margin, roughly in line with established aerospace peers like Northrop Grumman, each launch would contribute about $2.625 million in profit (5 % $52.5 million). At that pace, total owner earnings could reach approximately $39.4 million annually (15 launches $2.625 million). While Neutron's reusable design and in-house manufacturing could improve margins over time, this 5 % baseline provides a realistic near-term projection grounded in industry comparables. Moreover, the global commercial launch services market is expected to be worth around $12 billion to $15 billion by 2027, with the mid-lift segment (515 t payload) alone accounting for roughly $4 billion. Neutron targets that mid-lift bracket, giving Rocket Lab access to potentially $400 million$800 million per year from mega-constellation projects (e.g., Amazon Kuiper) plus U.S. government and other mid-satellite contracts. While the Neutron rocket promises a lot of growth for the company, it still ties with some major risks which can't be easily ignored. First of all, the Archimedes engine is not yet meeting its goals. It produces 0.8 MN of thrust instead of the 1 MN target. It burns for 112 seconds but needs to reach 180 seconds. Also, it can only be reused twice so far, while the goal is to reuse it 10 times. Secondly, building this rocket needs a lot of R&D funding, which is why Rocket Lab is burning through cash, making it tougher for the company to maintain financial health. Lastly, SpaceX's Falcon 9 already dominates the mid-lift market with proven reliability, and it will not be easy to bring their customers to divert to Neutron until it's fully ready to prove its strength on the real ground. So, Rocket Lab has to resolve technical issues in order to launch in 2026 as scheduled. While turning to financials, I have to admit that Rocket Lab's revenue growth has been really impressive. Annual sales climbed from $62 million in 2021 to $436 million in 2024, representing 78 % year-over-year (YoY) growth in 2024. This was driven by more launches, 16 Electron missions in 2024 versus 10 in 2023, and expanded deliveries of space systems. The space company's Gross profit turned positive in 2024 at $116 million versus $51 million in 2023 as production scaled. Operating results remain deeply negative with a 2024 GAAP operating loss of $189.8 million, roughly 43 % of revenue, up from a $177.9 million loss in 2023, reflecting rising R&D and SG&A. Rocket Lab is investing heavily in new technology such as Neutron and vertical integration, so operating margins are under pressure. Free cash flow has been negative each year, around $116 million in 2024, an improvement from $154 million in 2023. High capital spending of $28.7 million in Q1 2025 and lumpiness from contract timing kept GAAP operating cash flow deeply negative at $54.2 million in Q1 2025. However, The balance sheet has grown aggressively. Total liabilities rose to $823.7 million by Q1 2025 from $386.7 million in 2023 as the company funded its expansion. This includes a $345.9 million convertible note issuance and borrowings for new facilities. Equity financing offset this as Rocket Lab issued convertible preferred stock of 51 million shares in early 2025, boosting additional paid-in capital by $109 million. Moreover, the company held $517 million in cash, equivalents and marketable securities, up from $378 million at end-2024, providing a cash runway for scaling. Inventory and contract assets grew as production ramped, but contract liabilities and deferred revenue rose too, reflecting strong future bookings. Overall, the balance sheet shows healthy liquidity and significant R&D investment a trade-off for near-term losses but supporting the ability to scale new launch and space infrastructure offerings. Over the last four quarters, Rocket Lab has consistently beaten analysts' estimates on both the top and bottom lines. In Q1 2025, revenue was $122.6 million, up 32 % from Q1 2024. Space Systems accounted for $85 million of Q1 sales, with the remainder coming from launch services. Operating loss widened to $59.2 million versus $43.1 million a year earlier, and GAAP net loss was $60.6 million or $0.12 per share, reflecting ramped-up R&D and near-term investment. The firm reported a backlog of $1.067 billion at quarter-end, with 56 % expected to convert to revenue in 12 months, giving visibility into future bookings. Rocket Lab's $1.067 billion backlog at Q1 2025 isn't just a tally of orders; it's a testament to growing trust from commercial players and national security clients. Launch-related work has nearly doubled year-over-year, now making up 40 % of the total, signalling a structural shift. With Neutron locked into the Pentagon's $5.6 billion NSSL program and Electron demand soaring past 20 launches this year, Rocket Lab is evolving into a strategic supplier for recurring US government missions. About 56 % of the backlog converts to revenue within 12 months, offering real visibility and genuine excitement for what's ahead. For Q2 2025, management guided revenue of $130140 million and gross margins of 3032 %, suggesting another high-revenue quarter. Near-term profitability remains challenged by heavy spending on Neutron development and new facilities. As we look ahead, Analysts anticipate that Rocket Lab will achieve profitability by 2027. This projection aligns with the company's plans to scale up its Neutron rocket launches and reduce capital expenditures, potentially generating approximately $80 million in net income on $1.25 billion in revenue that year. In the interim, Rocket Lab is expected to remain unprofitable, with estimated losses of $0.38 per share in 2025 and $0.30 per share in 2026. However, the company anticipates becoming cash flow positive by 2026, driven by increased launch cadence and revenue growth. Rocket Lab's stock has been a hot topic among Wall Street's biggest names, and their recent guru trades tell an interesting story. On March 31, 2025, Cathie Wood's Ark Invest trimmed its RKLB holding by 30%, selling roughly 1.07 million shares, which now leaves her with 2.47 million shares. I believe she's taking profits after a strong run, but still keeping a sizable stake. That same day, Renaissance Technologies (Trades, Portfolio) quietly reduced by 16.5%, offloading around 300,000 shares (leaving 1.52 million). I think this modest trim hints at cautious optimism, they like the long-term growth story but are wary of near-term execution risk. Value guru Joel Greenblatt (Trades, Portfolio) also dialed back 24%, selling about 67,500 shares to land at roughly 214,000 shares. I believe he's locking in gains here, even value investors need to book some profit when a high-beta name spikes. Most dramatically, Paul Tudor Jones slashed 92.8% of his position, offloading roughly 286,000 shares and retaining only 22,000. That's a major vote of no confidence, and I think it signals he's moved on to other bigger splash opportunities. By contrast, Steven Cohen (Trades, Portfolio) made a splashy new buy on March 31, picking up 1.04 million shares. I believe his Millennium fund sees Neutron's upcoming launch (and the $5055 M price point) as a real catalyst. Overall, it's a mix of profit-taking, cautious trimming, and a couple of optimistic buys, telling me that Rocket Lab's runway still excites me, even if some big players are managing risk along the way. Those who have been closest to Rocket Lab have been selling off their stakes lately, and those who follow the market say their actions indicate a lack of confidence in the company's immediate prospects. Any time after March 17, 2025 and prior to July 23, 2025, anyone who follows the plan can sell shares just as Klein or Kampani did. I think the simultaneous selling by both executives suggests they are taking measures together to reduce risk ahead of Neutron being launched later than expected. On March 14, Adam C. Spice, the CFO, shifted 62,843 shares at $18.18, in total raising about $1.14 million. I personally believe the sale means he's confident in making gains after Electron's performance and still managing his own risk until the Neutron news comes. By late 2024, a big surge of director-level sales took place. On December 11, Director Nina Armagno offloaded 10,000 shares at a price of $23.63. On December 3, Director Alexander R. Slusky offloaded 100,000 shares for $23.64. In my opinion, these deals, especially Slusky's substantial one, suggest that board members acted fast during the upturn after the IDIQ contract ended to collect profits. In earlier deals, both Adam Spice and Frank Klein sold shares, parting with 62,511 and 35,988 shares, respectively, near $24.15 on November 25. I think, insiders prefer to secure their earnings from Rocket Lab's small missions, wait out expectations around Neutron and enter the market again when there are valued gains to pursue. Rocket Lab currently trades at 27.7 sales, compared with the aerospace & defense sector average of 2.7. This implies investors expect significantly higher growth despite today's modest revenues. For context, BWX Technologies (NYSE:BWXT) is valued at 34.3 earnings, roughly in line with the sector average, while ATI (NYSE:ATI) sits at 27.6 earnings, closer to broader industrial valuations. By contrast, Rocket Lab's 27.7-sales multiple appears elevated relative to peers. With roughly 461 million shares outstanding and a share price near $26.79, Rocket Lab's market capitalization is about $12.36 billion. To justify that valuation via a reverse DCF, investors would need to receive $12.36 billion in present-value free cash flow. Assuming each launch yields $52.5 million in revenue with a 5 % free cash flow margin (about $2.625 million per launch), Rocket Lab would have to complete roughly 4,710 successful launches ($12.36 billion $2.625 million) to generate that level of cash flow. Management guides toward approximately 25 Neutron launches annually beginning in 2027. At that cadence, achieving 4,710 launches would take nearly 189 years (4,710 25). Even if Rocket Lab hits its target cadence and 5 % margin, the implied payback period remains extremely long, underscoring today's lofty valuation. GuruFocus GF Model also indicates that GF Value for Rocket Lab USA in one year is $15.73, suggesting a downside of -43.53% from the current price of $27.86. In short, by standard DCF metrics and Gurufocus GF Model, Rocket Lab looks significantly overvalued today. Rocket Lab's stock has had a wild ride, plummeting early in 2025, ripping higher on Neutron hype and big defense wins, then dropping again after softer guidance. Its backlog and government contracts suggest real momentum, and Neutron's cheaper, reusable design could shake up the launch market. Yet the company is still losing money, burning cash on R&D and new facilities, and insiders and big funds have trimmed positions. At today's rich valuation, you're paying for future success, not current profits. If Neutron delivers and margins improve, Rocket Lab could reward investors, but there's plenty of execution risk along the way. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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3 days ago
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Big Dreams, Bigger Risks: Rocket Lab's Neutron Bet Faces Market Gravity
Shares of Rocket Lab (NASDAQ:RKLB) rallied immensely after the first-half decline in 2024, supported by both the business surrounding the neutron mission and contracts with governments. The stock is now 544% up over past 52-weeks. Earlier in the month, the space company reported strong Q1 findings, highlighted main achievement points and confirmed the company's key strategies. However, the company's share price dropped about 12% after it issued soft guidance and the earnings release. I think many ignore how strong Neutron will be in 2025, so I see this as knee-jerk selling. Neutron, a cheaper and reusable rocket, gives Rocket Lab an edge over SpaceX and has already helped the firm begin supplying services to government agencies. For instance, the U.S. Space Force picked Northrop Grumman to participate in the $5.6 billion third phase of its National Security Space Launch program, having selected only five companies. It also won contracts for its HASTE hypersonic vehicle in the U.S. and U.K. programs worth tens of billions. Besides moving into other segments, the company revealed it will buy Mynaric (a laser-communication provider) and develop more advanced satellites, showing their focus on growing in space infrastructure. In addition, Rocket Lab is growing much more quickly than SpaceX, launching nearly 60% more in 2024 than in 2023, which gives it an edge in the space market. Rocket Lab is teaming up with the U.S. Air Force to build its new Neutron rocket, which could transform Rocket Lab and the whole space industry. Neutron is 43 meters high, its diameter is 7 meters, and it is capable of transporting 13,000 kg to low-Earth orbit. The Archimedes engines allow it to lift off by creating 480,000 kg of thrust. I am especially amazed by how much the spacecraft is expected to cost when it launches, at $5055 million. In comparison, SpaceX's Falcon 9 costs around $67 million for every launch and it can accommodate 22,800 kg, set at about $3,000 per kilogram. Neutron is cheaper for each launch, but it costs about $4,000$4,300 per kilogram, so it is less cost-effective. Even so, Neutron has some additional strengths. It is suitable for frequent medium-lift missions such as those needed for the Kuiper satellite constellation operated by Amazon (AMZN). Having a reusable rocket and built-in fairings means the process can be performed faster, saving money. Although Falcon 9 is built for many missions, Neutron concentrates on getting to orbit as quickly as possible and reliably. Being able to make most of their own parts at Rocket Lab helps control their budget and maintain a high standard of quality. Because it has launch sites in the U.S. and New Zealand, the company is able to provide more options for when customers can book a launch. Usually, the cost plays a big role in deciding when to launch, and Neutron's more affordable price might appeal to many users. I also like that it can be used again, which should boost Rocket Lab's earnings as it improves how to collect them. Being picked for the NSSL list on a $5.6 billion indefinite delivery, indefinite quantity (IDIQ) contract until 2029 from the U.S. Space Force is a strong vote of confidence in Neutron's abilities. When the launch starts next year, I expect investor interest to rise. If Rocket Lab successfully scales Neutron launches, it could generate about $787.5 million in annual revenue by flying 15 rockets a year at an average $52.5 million per launch (15 $52.5 million = $787.5 million). Assuming a conservative 5 % net margin, roughly in line with established aerospace peers like Northrop Grumman, each launch would contribute about $2.625 million in profit (5 % $52.5 million). At that pace, total owner earnings could reach approximately $39.4 million annually (15 launches $2.625 million). While Neutron's reusable design and in-house manufacturing could improve margins over time, this 5 % baseline provides a realistic near-term projection grounded in industry comparables. Moreover, the global commercial launch services market is expected to be worth around $12 billion to $15 billion by 2027, with the mid-lift segment (515 t payload) alone accounting for roughly $4 billion. Neutron targets that mid-lift bracket, giving Rocket Lab access to potentially $400 million$800 million per year from mega-constellation projects (e.g., Amazon Kuiper) plus U.S. government and other mid-satellite contracts. While the Neutron rocket promises a lot of growth for the company, it still ties with some major risks which can't be easily ignored. First of all, the Archimedes engine is not yet meeting its goals. It produces 0.8 MN of thrust instead of the 1 MN target. It burns for 112 seconds but needs to reach 180 seconds. Also, it can only be reused twice so far, while the goal is to reuse it 10 times. Secondly, building this rocket needs a lot of R&D funding, which is why Rocket Lab is burning through cash, making it tougher for the company to maintain financial health. Lastly, SpaceX's Falcon 9 already dominates the mid-lift market with proven reliability, and it will not be easy to bring their customers to divert to Neutron until it's fully ready to prove its strength on the real ground. So, Rocket Lab has to resolve technical issues in order to launch in 2026 as scheduled. While turning to financials, I have to admit that Rocket Lab's revenue growth has been really impressive. Annual sales climbed from $62 million in 2021 to $436 million in 2024, representing 78 % year-over-year (YoY) growth in 2024. This was driven by more launches, 16 Electron missions in 2024 versus 10 in 2023, and expanded deliveries of space systems. The space company's Gross profit turned positive in 2024 at $116 million versus $51 million in 2023 as production scaled. Operating results remain deeply negative with a 2024 GAAP operating loss of $189.8 million, roughly 43 % of revenue, up from a $177.9 million loss in 2023, reflecting rising R&D and SG&A. Rocket Lab is investing heavily in new technology such as Neutron and vertical integration, so operating margins are under pressure. Free cash flow has been negative each year, around $116 million in 2024, an improvement from $154 million in 2023. High capital spending of $28.7 million in Q1 2025 and lumpiness from contract timing kept GAAP operating cash flow deeply negative at $54.2 million in Q1 2025. However, The balance sheet has grown aggressively. Total liabilities rose to $823.7 million by Q1 2025 from $386.7 million in 2023 as the company funded its expansion. This includes a $345.9 million convertible note issuance and borrowings for new facilities. Equity financing offset this as Rocket Lab issued convertible preferred stock of 51 million shares in early 2025, boosting additional paid-in capital by $109 million. Moreover, the company held $517 million in cash, equivalents and marketable securities, up from $378 million at end-2024, providing a cash runway for scaling. Inventory and contract assets grew as production ramped, but contract liabilities and deferred revenue rose too, reflecting strong future bookings. Overall, the balance sheet shows healthy liquidity and significant R&D investment a trade-off for near-term losses but supporting the ability to scale new launch and space infrastructure offerings. Over the last four quarters, Rocket Lab has consistently beaten analysts' estimates on both the top and bottom lines. In Q1 2025, revenue was $122.6 million, up 32 % from Q1 2024. Space Systems accounted for $85 million of Q1 sales, with the remainder coming from launch services. Operating loss widened to $59.2 million versus $43.1 million a year earlier, and GAAP net loss was $60.6 million or $0.12 per share, reflecting ramped-up R&D and near-term investment. The firm reported a backlog of $1.067 billion at quarter-end, with 56 % expected to convert to revenue in 12 months, giving visibility into future bookings. Rocket Lab's $1.067 billion backlog at Q1 2025 isn't just a tally of orders; it's a testament to growing trust from commercial players and national security clients. Launch-related work has nearly doubled year-over-year, now making up 40 % of the total, signalling a structural shift. With Neutron locked into the Pentagon's $5.6 billion NSSL program and Electron demand soaring past 20 launches this year, Rocket Lab is evolving into a strategic supplier for recurring US government missions. About 56 % of the backlog converts to revenue within 12 months, offering real visibility and genuine excitement for what's ahead. For Q2 2025, management guided revenue of $130140 million and gross margins of 3032 %, suggesting another high-revenue quarter. Near-term profitability remains challenged by heavy spending on Neutron development and new facilities. As we look ahead, Analysts anticipate that Rocket Lab will achieve profitability by 2027. This projection aligns with the company's plans to scale up its Neutron rocket launches and reduce capital expenditures, potentially generating approximately $80 million in net income on $1.25 billion in revenue that year. In the interim, Rocket Lab is expected to remain unprofitable, with estimated losses of $0.38 per share in 2025 and $0.30 per share in 2026. However, the company anticipates becoming cash flow positive by 2026, driven by increased launch cadence and revenue growth. Rocket Lab's stock has been a hot topic among Wall Street's biggest names, and their recent guru trades tell an interesting story. On March 31, 2025, Cathie Wood's Ark Invest trimmed its RKLB holding by 30%, selling roughly 1.07 million shares, which now leaves her with 2.47 million shares. I believe she's taking profits after a strong run, but still keeping a sizable stake. That same day, Renaissance Technologies (Trades, Portfolio) quietly reduced by 16.5%, offloading around 300,000 shares (leaving 1.52 million). I think this modest trim hints at cautious optimism, they like the long-term growth story but are wary of near-term execution risk. Value guru Joel Greenblatt (Trades, Portfolio) also dialed back 24%, selling about 67,500 shares to land at roughly 214,000 shares. I believe he's locking in gains here, even value investors need to book some profit when a high-beta name spikes. Most dramatically, Paul Tudor Jones slashed 92.8% of his position, offloading roughly 286,000 shares and retaining only 22,000. That's a major vote of no confidence, and I think it signals he's moved on to other bigger splash opportunities. By contrast, Steven Cohen (Trades, Portfolio) made a splashy new buy on March 31, picking up 1.04 million shares. I believe his Millennium fund sees Neutron's upcoming launch (and the $5055 M price point) as a real catalyst. Overall, it's a mix of profit-taking, cautious trimming, and a couple of optimistic buys, telling me that Rocket Lab's runway still excites me, even if some big players are managing risk along the way. Those who have been closest to Rocket Lab have been selling off their stakes lately, and those who follow the market say their actions indicate a lack of confidence in the company's immediate prospects. Any time after March 17, 2025 and prior to July 23, 2025, anyone who follows the plan can sell shares just as Klein or Kampani did. I think the simultaneous selling by both executives suggests they are taking measures together to reduce risk ahead of Neutron being launched later than expected. On March 14, Adam C. Spice, the CFO, shifted 62,843 shares at $18.18, in total raising about $1.14 million. I personally believe the sale means he's confident in making gains after Electron's performance and still managing his own risk until the Neutron news comes. By late 2024, a big surge of director-level sales took place. On December 11, Director Nina Armagno offloaded 10,000 shares at a price of $23.63. On December 3, Director Alexander R. Slusky offloaded 100,000 shares for $23.64. In my opinion, these deals, especially Slusky's substantial one, suggest that board members acted fast during the upturn after the IDIQ contract ended to collect profits. In earlier deals, both Adam Spice and Frank Klein sold shares, parting with 62,511 and 35,988 shares, respectively, near $24.15 on November 25. I think, insiders prefer to secure their earnings from Rocket Lab's small missions, wait out expectations around Neutron and enter the market again when there are valued gains to pursue. Rocket Lab currently trades at 27.7 sales, compared with the aerospace & defense sector average of 2.7. This implies investors expect significantly higher growth despite today's modest revenues. For context, BWX Technologies (NYSE:BWXT) is valued at 34.3 earnings, roughly in line with the sector average, while ATI (NYSE:ATI) sits at 27.6 earnings, closer to broader industrial valuations. By contrast, Rocket Lab's 27.7-sales multiple appears elevated relative to peers. With roughly 461 million shares outstanding and a share price near $26.79, Rocket Lab's market capitalization is about $12.36 billion. To justify that valuation via a reverse DCF, investors would need to receive $12.36 billion in present-value free cash flow. Assuming each launch yields $52.5 million in revenue with a 5 % free cash flow margin (about $2.625 million per launch), Rocket Lab would have to complete roughly 4,710 successful launches ($12.36 billion $2.625 million) to generate that level of cash flow. Management guides toward approximately 25 Neutron launches annually beginning in 2027. At that cadence, achieving 4,710 launches would take nearly 189 years (4,710 25). Even if Rocket Lab hits its target cadence and 5 % margin, the implied payback period remains extremely long, underscoring today's lofty valuation. GuruFocus GF Model also indicates that GF Value for Rocket Lab USA in one year is $15.73, suggesting a downside of -43.53% from the current price of $27.86. In short, by standard DCF metrics and Gurufocus GF Model, Rocket Lab looks significantly overvalued today. Rocket Lab's stock has had a wild ride, plummeting early in 2025, ripping higher on Neutron hype and big defense wins, then dropping again after softer guidance. Its backlog and government contracts suggest real momentum, and Neutron's cheaper, reusable design could shake up the launch market. Yet the company is still losing money, burning cash on R&D and new facilities, and insiders and big funds have trimmed positions. At today's rich valuation, you're paying for future success, not current profits. If Neutron delivers and margins improve, Rocket Lab could reward investors, but there's plenty of execution risk along the way. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
05-05-2025
- Business
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Rocket Lab Wins Share of a $46 Billion Defense Contract. How Big a Share? Well...
Rocket Lab might theoretically get $46 billion in revenue from two new U.S. and U.K. weapons contracts. "Theoretically" is the operative word in the above sentence. Rocket Lab's actual winnings on these two contracts are likely to be much, much smaller than headlines suggest. It's been two weeks now since Rocket Lab (NASDAQ: RKLB) announced the big news that it was included in a $46 billion (headline value) contract "to provide hypersonic test launch capability with its HASTE launch vehicle ... for the United States and the United Kingdom." For a tiny space company that did just $436 million in business over the last 12 months, you would expect that kinda news to have a big effect on the stock price. And it did. Just perhaps not quite as big an effect as you would expect. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » Over the two weeks since the contract was announced, Rocket Lab's stock price has jumped about 15%, most of which came on the day immediately following the announcement. It's a substantial advance for the space stock-turned-defense contractor, but perhaps not as big as a $46 billion contract win would ordinarily imply. And why not? Well, when you read the fine print of the deal, you will see important bits like: "Rocket Lab has been selected by the U.S. Air Force to participate within its Enterprise-Wide Agile Acquisition Contract (EWAAC), a $46 billion indefinite delivery-indefinite quantity (IDIQ) contract designed for the rapid acquisition of innovative technologies, engineering services, and technical solutions." So right off the bat, we see here that the $46 billion value isn't set in stone. It's dependent upon a sufficient number of task orders being awarded, and for sufficient numbers of dollars per order, under the larger IDIQ umbrella contract. Moreover, Rocket Lab is only one of many companies that will "participate" in this umbrella contract. In fact, if you dig a little deeper and search for details on EWAAC, what you'll discover is that a total of 297 separate vendors will be bidding to perform work on the EWAAC contract. Rocket Lab is only one of these companies. So if, hypothetically, each participant wins a proportional amount of work, Rocket Lab's own share of the funds might be as little as $155 million. And if you search a little more, you may discover that EWAAC is expected to run through 2031. That makes this a seven-year contract; divided into $155 million, this implies that Rocket Lab's share of the work could in fact be as little as $22 million per year. Now don't get me wrong. That $22 million is still a very respectable number, representing roughly 6% of the revenue Rocket Lab currently makes in a year. And there's every reason to believe that a leading company in the space industry like Rocket Lab, currently the second most prolific rocket launcher in America (after SpaceX) might win a disproportionate amount of the funds on offer under EWAAC. It's just that that's not guaranteed to happen. It's also worth noting that other participants in EWAAC have even more market heft to throw around than does Rocket Lab, and are correspondingly just as likely, or even more likely, to win disproportionately large shares of the funds on offer. Among the aerospace and defense stocks that Rocket Lab will be competing with are such giants as Boeing (NYSE: BA), L3 Technologies (NYSE: LHX), Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), and RTX (NYSE: RTX). So good news and bad news for Rocket Lab, and there's even more good news to tell. In addition to its work on EWAAC, Rocket Lab announced last month that it will be participating in the United Kingdom's Hypersonic Technologies & Capability Development Framework (HTCDF). Smaller in size than EWAAC, HTCDF also poses less competition for Rocket Lab, as only about 90 companies are expected to be competing in this one. HTCDF is, however, also a much smaller program, valued at just $1.3 billion. Divided 90 ways, that makes it worth less than $14.5 million per participant, assuming the monies end up divided equally, and not weighted to favor U.K.-based contractors such as BAE Systems (OTC: BAES.Y). And spread over a seven-year contract, the likelihood is that this is probably only about a $2 million-per-year program for the winners. Anyway, that right there basically sums up the worst-case scenario for Rocket Lab: $22 million plus $2 million means the company can reasonably expect to add $24 million to its annual revenue stream across these two hypersonic weapons contracts. It's better than nothing, I suppose, but despite the size of the headline numbers, I don't think it's necessarily going to move the needle for Rocket Lab, or accelerate its growth rate dramatically. And unless Rocket Lab ends up winning far more contract value than average on these contracts, I don't think a 6% improvement in annual revenue necessarily makes Rocket Lab stock a better buy than it was before the contracts were awarded. Before you buy stock in Rocket Lab USA, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Rocket Lab USA wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $623,685!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $701,781!* Now, it's worth noting Stock Advisor's total average return is 906% — a market-crushing outperformance compared to 164% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of April 28, 2025 Rich Smith has positions in Rocket Lab USA. The Motley Fool has positions in and recommends L3Harris Technologies. The Motley Fool recommends BAE Systems, Lockheed Martin, RTX, and Rocket Lab USA. The Motley Fool has a disclosure policy. Rocket Lab Wins Share of a $46 Billion Defense Contract. How Big a Share? Well... was originally published by The Motley Fool Sign in to access your portfolio
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24-04-2025
- Business
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Why Rocket Lab Stock Is Surging Today
April 24 - Rocket Lab (NASDAQ:RKLB) shares climbed more than 5% on Thursday morning after the aerospace company secured a new contract to launch a hypersonic test flight for the U.S. Department of Defense. Warning! GuruFocus has detected 2 Warning Sign with RKLB. The mission will be carried out using Rocket Lab's HASTE suborbital vehicle as part of the MACH-TB 2.0 program led by Kratos (KTOS), a $1.45 billion initiative to boost testing cadence for hypersonic technologies. The launch is scheduled no earlier than Q1 2026 and will take place at Rocket Lab's Launch Complex 2 in Wallops Island, Virginia. This is the first full-scale test under MACH-TB 2.0 for Rocket Lab, which joined Kratos' subcontractor team in January following successful launches during the program's first phase. HASTE, a modified version of the Electron rocket, supports payloads up to 700 kg and can simulate speeds above 7.5 km per secondkey for testing glide, ballistic, and air-breathing technologies. The new mission adds to a growing slate of hypersonic tests lined up through 2026. Rocket Lab has also been tapped for related U.S. and U.K. defense frameworks, including the U.S. Air Force's EWAAC and the U.K. MOD's HTCDF programs. This article first appeared on GuruFocus.
