Is Rocket Lab Stock a Buy or Sell After Earnings?

Space juggernaut Rocket Lab (RKLB) recently released its mixed Q2 earnings results, which sent the stock soaring 12.6% in a single session on Aug. 9. Although the company missed analysts' revenue estimates, it has shown substantial top-line growth, pointing to strong demand for its launch services and space systems products. Additionally, the report underscores Rocket Lab's promising long-term growth trajectory, backed by the fast-growing space sector.

According to McKinsey, the space economy is projected to reach $1.8 trillion by 2035. As the space economy expands, firms like Rocket Lab are poised to benefit significantly. That said, investors should refine their strategies to align with the firm’s potential for future expansion and market dominance.

With RKLB rallying again to close out the week amid reports that its spacecraft are heading to Mars on a NASA mission, let's dive deeper and assess the Rocket Lab’s current positioning in the volatile stock market at this time.

About Rocket Lab Stock

Based in California, Rocket Lab (RKLB) is a key emerging player in the space sector. It has established a solid reputation in the space market by providing small satellite launch services for defense and commercial markets.

Along with its Electron rocket, the space company is developing the Neutron rocket, a vehicle designed to enhance its payload capacity and adaptability. It caters to a broader range of missions, including satellite constellation deployment and interplanetary voyages. This positions Rocket Lab as a key innovator in orbital logistics. 

Valued at $2.87 billion by market cap, RKLB has been volatile lately, with traders selling shares amid reports that the Neutron's launch would be delayed. However, the stock is back to green on a YTD basis, up 23.2% for the year.

RKLB Soars After Q2 Results

Rocket Lab stock soared after its Aug. 8 earnings release, which featured a narrower-than-forecast quarterly loss to help offset the top-line miss. 

Sales of $106.3 million missed estimates by $1 million, but showed an immense 70% growth from last year - and was the highest quarterly revenue in company history. The launch segment added $29.4 million in total revenue, and the space segment added $77 million. Gross profit rose from $14 million to $27 million, marking a hefty 92% increase YoY. 

Moreover, Rocket Labs' backlog surpass $1 billion at the end of the quarter, including a launch backlog of $294 million and space systems backlog of $772.6 million. Approximately 44% of the backlog is expected to be recognized as revenue within 12 months. 

Most impressively, the firm reported a per-share loss of 8 cents, beating analysts' expectations by 2 cents. Rocket Lab ended the quarter with a cash and equivalents balance of $546.8 million, and management expects to achieve breakeven on a cash flow basis “roughly two quarters after the first Neutron launch.”

Key Milestones for Rocket Lab

Electron, the company's flagship rocket, is now the third most-launched globally, and accounts for 64% of all non-SpaceX launches in 2024 so far. It was the fastest commercially developed rocket to reach 50 launches, and is on pace to achieve 100 launches in record time, as well.

In Q2, the company secured over $720 million in contracts for spacecraft under development. It also completed the construction of those twin satellites designed for the NASA mission to Mars, and successfully concluded development reviews for multiple government and commercial satellite constellations.

On Aug. 8, the company announced that it performed the first static-fire test of the Archimedes engine at full power, significantly advancing the Neutron rocket's development. The company remains on track for Neutron's mid-2025 debut. Rocket Lab has conducted nine Electron launches this year, with a slower Q3 expected due to customer delays, but anticipates increased launch activity in Q4.

Rocket Lab announced earlier this month that it would undertake its 52nd Electron mission, launching a satellite for U.S.-based Capella Space, which specializes in Earth observation technology. This U.S. company tasked Rocket Lab with launching a single Acadia-3 SAR satellite for its Earth-imaging constellation. This mission further strengthens Rocket Lab's reputation as a reliable launch provider in the commercial space sector.

Prior to that, the company launched its fifth SAR satellite for Synspective, enhancing image resolution and coverage. This latest satellite, placed into a mid-inclination orbit, allows more frequent and diverse imaging. Synspective plans six more launches with Rocket Lab under its largest contract to date, extending through 2027.

What Do Analysts Think About Rocket Lab?

While some analysts remain cautious on RKLB, the company's scaling contracts and projects could potentially drive the stock price higher.

After the Q2 results, analysts at KeyBanc, Citi, Stifel Nicolaus, and more reiterated “Buy” equivalent ratings on RKLB. While the stock's consensus rating has dipped from “Strong Buy” two months ago to “Moderate Buy” now, the consensus is still generally bullish. Out of 12 analysts offering recommendations, 8 say it's a “Strong Buy," and 4 say it's a “Hold.”

The average price target for RKLB is $7.25, about 10.8% above current levels, while the Street-high target of $10 is a premium of 53%. 

Priced at a steep 6.81 times forward sales, Rocket Lab stock has significant long-term growth potential - but given that it's still unprofitable and burning cash, it's likely an investment idea best reserved for traders with more robust risk appetites at current levels.