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Daily Finance Newsletter - Stock Pick- Rocket Labs
Rocket Lab has been on an absolute tear. The stock gained 500% in 12 months, turning a $5 billion company into a $30 billion space giant faster than you can say "liftoff."
The company isn't just launching rockets - they're building satellites, spacecraft components, and positioning themselves as the "SpaceX alternative" with end-to-end space capabilities. They've got a $1 billion backlog, record revenues, and a visionary CEO in Peter Beck.
But here's where it gets weird. I analyzed 5 recent analyst reports, and the ratings look great on paper:
The Scorecard:
🟢 BUY: 4 analysts (80%)
🟡 HOLD: 1 analyst (20%)
🔴 SELL: 0 analysts (0%)
Sounds bullish, right? Except multiple BUY-rated analysts are actively warning investors that the stock could lose half its value within weeks. What's going on?
Before we go on a deep dive, We want to thank our sponsor for this edition
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The Bull Case: "The Next SpaceX"
The optimists see Rocket Lab as catching SpaceX at the perfect moment - after de-risking but before profitability.
The Growth Story:
Two Revenue Engines:
Launch Services: Second-most frequent orbital launches globally (after SpaceX) with their proven Electron rocket at $7-10M per launch
Space Systems: The underrated goldmine - nearly 60% of their $1B backlog comes from building satellites and components for other companies
The Neutron Game-Changer: This is the big bet. Their new Neutron rocket will increase payload capacity 40x (from 700 lbs to 33,000 lbs) and unlock massive new markets:
Telesat Lightspeed: Needs ~22 Neutron launches = $1.1-1.2B revenue potential
Amazon Project Kuiper: 570kg satellites perfect for Neutron's capacity
Japan's space program: Already signed JAXA for Electron, Neutron is next
At $50-55M per launch, Neutron fills the "medium-lift gap" that SpaceX's Falcon 9 ($67M) doesn't efficiently serve.
The Execution Story:
Q2 2025: Record $144M revenue (+36% YoY)
Expanding margins: Gross margin up 650 basis points
EPS breakeven expected Q4 2026 - profitability is in sight
Recent wins: $515M Space Development Agency contract for 18 spacecraft
The Vision: CEO Peter Beck is building the vertically integrated space company that can design satellites, build them, launch them, and operate them - exactly like SpaceX's playbook.
The Bear Case: "Priced for Perfection When Rockets Rarely Are"
This is where it gets uncomfortable. The bears aren't arguing Rocket Lab is a bad company - they're arguing the math is insane and the upcoming catalyst is terrifying.
Problem #1: Valuation From Outer Space
Let's talk numbers that make your eyes water:
P/S Ratio: 50-54x (Price-to-Sales)
For context: NVIDIA trades at 28x
Firefly Aerospace (competitor): 33.64x
Sector median: 2.15x
Analyst Oakoff Investments puts it bluntly: Rocket Lab is now valued more expensively than SpaceX on a sales multiple basis (~34.5x FY2026 sales vs SpaceX's ~20x).
The company has a $30 billion market cap but expects only $1 billion in revenue by FY2027. Even with growth, you're paying 30x revenue for a company that's still losing money.
Problem #2: The Neutron Launch Gamble
Here's the terrifying part: The market has priced in a successful Neutron launch as guaranteed.
The reality? It's anything but guaranteed:
The Delay Pattern:
Neutron has been delayed at least 3 times
Originally targeted for mid-2025
Pushed to November 2025
Now targeting December 2025 (maybe)
The Failure Precedent: Analyst David H. Lerner drops the uncomfortable truth: SpaceX's Starship failed 10 times before success. That's SpaceX - the most successful rocket company in history.
First rocket launches almost always fail. It's not pessimism - it's physics and statistics.
Problem #3: CEO Overpromising
Peter Beck's quote haunts the analysts: "Stuff that we build works the first time" and "We do not expect it to fail."
That's... not how rocket launches work. Neutron is completely new:
First reusable Rocket Lab vehicle
New Archimedes engines
New "Hungry Hippo" payload deployment mechanism
Brand new launch facility at Wallops Island
Multiple new systems = compounding failure points.
Problem #4: Still Burning Cash
$110M negative cash flow (trailing twelve months)
Still not profitable (won't break even until Q4 2026)
Operating in an industry that eats capital for breakfast
The Real Story: It's ALL About Neutron
This isn't a normal stock analysis situation. Every single analyst - bulls and bears alike - agrees on one thing:
The Neutron launch is a binary make-or-break event.
Scenario A: Successful Launch ✅
Validates the $30B valuation
Opens floodgates to $1B+ revenue opportunities
Stock likely rallies further toward $75-80
Bulls vindicated
Scenario B: Launch Failure ❌
Expected 30-50% correction to $30-40 range
Multiple analysts see >50% probability of first launch failure
Would wipe out $15 billion in market cap
Creates "buying opportunity" for long-term believers
Analyst David H. Lerner is blunt about his strategy: "I Believe Rocket Lab Could Lose Half Its Value, Buy It Then." He's bullish long-term but expects the stock to crash first.
Bottom Line: So Should You Buy?
For Most Investors: WAIT ⏸️
The consensus strategy from analysts is surprisingly uniform:
For Current Holders:
Consider trimming positions before Neutron launch
Write covered calls to capture premium
Lock in some gains from the 500% run
For New Investors:
Wait for the Neutron launch outcome
If it fails: Buy the dip in the $30-40s for long-term hold
If it succeeds: Accept higher entry price but lower risk
For Risk-Tolerant Investors:
Buy now only if you have 5+ year horizon
Can stomach 50% drawdown
Believe in the long-term vision regardless of short-term volatility
The Three Scenarios:
Neutron Success (50% probability): Stock rallies to $75-90 → Early buyers win big
Neutron Delay/Minor Issue (25% probability): Stock trades sideways $40-60 for months → Dead money
Neutron Failure (25% probability): Stock crashes to $30-40 → Long-term opportunity emerges
The Final Word
Rocket Lab is executing brilliantly on its current business, has visionary leadership, and Neutron could be absolutely transformational. The problem? The stock is priced as if Neutron's success is guaranteed - when history says it's more likely to fail than succeed on first attempt.
The 80% BUY rating isn't wrong about the long-term opportunity. But those same analysts are telling you: There's probably a better entry point coming soon.
Sometimes the best trade is waiting for the crash that hasn't happened yet.
As one analyst perfectly summarized: "Not too early, not too late" - but definitely before you know if the rocket actually works.
Watch the Neutron launch livestream. Your portfolio's next 50% move depends on it - one way or the other.