MW Rocket Lab's outlook disappoints, but SpaceX-style growth is still ahead: analyst

By James Rogers

Rocket Lab is on track for 'a similarly aggressive growth trajectory as SpaceX,' writes KeyBanc Capital Markets analyst Michael Leshock

Rocket Lab USA Inc. shares tumbled in the wake of the company's fourth-quarter results Thursday, weighed down by weak outlook, although analyst firm KeyBanc Capital Markets believes the company's long-term growth prospects are still strong.

KeyBanc Capital Markets lowered its price target to $28 from $32, to reflect the lower first-quarter sales baseline, in a note released Thursday. However, the analyst firm maintained its overweight rating for the stock $(RKLB)$. "Our [long-term] thesis remains intact," analyst Michael Leshock wrote in the note. "We believe [Rocket Lab] is on track to follow a similarly aggressive growth trajectory as SpaceX, and [Rocket Lab] is positioned to be an industry leader in both launch services and satellite manufacturing/design."

Rocket Lab has emerged as something of a darling among space stocks, boosted by the company's strong performance in recent years. Set against this backdrop, the stock has skyrocketed 336.8% in the last 12 months.

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Of 14 analysts surveyed by FactSet, eight have a buy rating and six have a hold rating for Rocket Lab.

On the conference call to discuss the results, Rocket Lab was questioned about its decision to move the test launch of its new Neutron rocket to the second half of this year. Previously, the company had targeted a mid-2025 launch.

"Neutron's first launch timing is now [the second half of 2025] (from 'no earlier than mid-2025'), which we believe expresses management's confidence in where [Rocket Lab] is in the production and testing processes, and its ability to meet qualifications/milestones in a timely manner," Leshock wrote in Thursday's note. "Management expressed its confidence in its ability to hit all timeline milestones and get Neutron to the pad by the end of the year, and indicated it remains on track with its $250M-$300M budget ($200M spent to date)."

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Stifel also lowered its Rocket Lab price target to $27 from $31 but maintained its buy rating. The company's solid fourth-quarter results were overshadowed by its softer first-quarter guidance and the slight pushout of the Neutron launch, Stifel analyst Erik Rasmussen wrote in a note released Friday. "Rocket Lab reported revenue towards the high end of its prior guidance, while also delivering better-than-expected [adjusted earnings before interest, taxes, depreciation and amortization] loss," he wrote. "Guidance for [the first quarter] however fell short, with launch impacted by lower [average selling prices] and space systems being impacted by mix and revenue recognition."

However, Stifel expects Rocket Lab's growth to resume in the second quarter and to accelerate in the second half of the year.

Speaking during the conference call to discuss the fourth-quarter results, Rocket Lab Chief Financial Officer Adam Spice said that the company expects to return to sequential growth in the second quarter.

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On Thursday Rocket Lab also announced a new "Flatellite" satellite technology that it said will help it achieve its goal of operating large constellations.

Rocket Lab shares are down more than 15% in premarket trading Friday, putting the stock on pace for its largest daily percentage decline since Feb. 1, 2024, when it dropped 17.11%, Dow Jones Market Data show.

"We believe any pull-back creates a better entry point for investors as growth will resume in [the second quarter] and accelerate in the second half of the year," Stifel's Rasmussen wrote in Friday's note. "We still see Neutron as a key catalyst and will open up a much larger [total addressable market] for the company, while the introduction of its low-cost, mass-producible satellite for large constellations could be a game changer in the industry, and begins the final step in its evolution to become a true end-to-end space company."

-James Rogers

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February 28, 2025 09:20 ET (14:20 GMT)

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