Shares of Rocket Lab (RKLB, Financial) 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.
Neutron Rocket: A Game-Changer for Rocket Lab?
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 $50–55 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.
What will happen after the Neutron Launch?
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 Ă— $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 % Ă— $52.5 million).
At that pace, total owner earnings could reach approximately $39.4 million annually (15 launches Ă— $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 (5–15 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.
Risks with Neutron
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.
Financial Overview
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 $130–140 million and gross margins of 30–32 %, 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.
Latest Guru Trades
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 $50–55 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.
Insider Trading
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.
Valuation Analysis
Rocket Lab currently trades at 27.7Ă— sales, compared with the aerospace & defense sector average of 2.7Ă—. This implies investors expect significantly higher growth despite today's modest revenues.
For context, BWX Technologies (BWXT, Financial) is valued at 34.3Ă— earnings, roughly in line with the sector average, while ATI (ATI, Financial) sits at 27.6Ă— earnings, closer to broader industrial valuations. By contrast, Rocket Lab's 27.7Ă—-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 Ă· $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 Ă· 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.
The bottom line
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.
