Jeff Bezos' Blue Origin may have grabbed a few headlines for its cringeworthy glam space ride two weeks ago, but the real space stock to watch is RocketLab USA (RKLB).
The second-most-successful space stock after SpaceX with over 60 successful launches that have put some 224 satellites into orbit, RKLB is positioning itself for its next phase of growth. With potential domestic and foreign government defense contracts valued in the tens of millions of dollars, if not billions, RocketLab may soon go stratospheric.
RocketLab has unique characteristics that even SpaceX can't provide. It has the only reusable small launch vehicle in its Electron rocket, giving it a leadership role in the small- to medium-launch market. But next year it will begin offering its new Neutron rocket, which will compete head-to-head with SpaceX's Falcon 9 in the $22 billion satellite launch industry. The Neutron is designed for Deep Space missions as well.
As its successes mount, RKLB stock has been a moonshot. Shares are up 508% over the past year, but analysts are expecting it to go even higher.
Needham analyst Ryan Koontz just initiated coverage of RKLB with a buy rating and an industry high one-year price target of $28 per share, which implies 27% upside from its current price.
Koontz says RocketLab is a "disruptive company in the fast-evolving space sector," and because of its vertical integration it is in a "prime position" to effectively challenge SpaceX.
The space stock reports first-quarter earnings on May 8 and it could be the point where RKLB stock goes into deep space.
Wall Street expects RocketLab to report revenue of $121.37 million, a 30% increase over the year-ago $92.77 million. Forecasts call for losses of $0.09 per share, wider than the $0.06 per share it lost last year, but 2026 could be the year it pivots to profits.
The Neutron rocket will allow RocketLab to greatly cut its research and development and equipment spending. It spent $174.4 million on R&D last year, a 46% increase over 2023. With operating costs in 2024 only rising 6.6%, the space stock ought to turn profitable on an operating basis quickly. GAAP profits should soon follow.
Because SpaceX iss so far out in front it will take time to catch up to the leader, but with a viable competitor in the market, RocketLab should begin winning contracts. Volume launches of the Neutron rocket likely won't begin until 2028 or beyond.
RocketLab has the Neutron's first test flight scheduled for later this year, with the first three commercial launches forecast in 2026. Five more are expected to come in 2027. In comparison, SpaceX launched 132 rockets last year and is planning for 180 launches this year.
As Koontz noted, RocketLab is a vertically integrated company. It describes itself as an "end-to-end space company" offering a full suite of services and equipment to customers. Beyond its launch capabilities from three launch sites, RocketLab offers spacecraft design and manufacturing, satellite components, equipment, and more. It allows the business to manage and control almost every aspect of design, manufacturing and launch operations, that will ultimately lower its cost per flight.
While the Electron rocket launches are the most eye-catching part of the space stock's operations, it's actually the space systems division that generates the most revenue.
Last year, RocketLab grew space system revenue 80% to $310.8 million, or 71% of total revenue. Launches generated$125.4 million, up 74%. It has been using the money from its space system sales to finance its R&D spending, which, as previously noted, should begin a rapid decline once the Neutron begins commercial operations.
Make no mistake, RKLB stock is not cheap. At 23 times sales, it's about 3.5 times more expensive than Intuitive Machines (LUNR), the space stock that has gone to the moon twice (albeit semi-successfully) and almost 10 times more than space components maker Redwire (RDW).
Yet, as RocketLab garners more government and commercial contracts, its valuation will narrow considerably. It was recently selected for two major government programs aimed at advancing hypersonic technologies: the U.S. Air Force’s $46 billion Enterprise-Wide Agile Acquisition Contract and the U.K. Ministry of Defence’s $1.3 billion Hypersonic Technologies & Capability Development Framework.
Those monies won't all come to RocketLab, but it can share in them as the contracts are awarded. Rocket Lab has over $1 billion in contract backlog.
The earnings report on May 8 won't necessarily shed any more light on RKLB's capabilities, but investors would do well to listen to where CEO Peter Beck points to where its heading. Likely it will be alongside its stock that could rocket higher.
