Rocket Lab (RKLB) wrapped up 2024 on a high note, delivering record-breaking revenue and impressive year-over-year growth. The aerospace company, known for its satellite launch services and space systems, reported annual revenue of $436 million, a staggering 78% increase compared to the previous year.
The fourth quarter was robust, with revenue surging 121% year-over-year and 26% sequentially from Q3. Despite these strong numbers, Rocket Lab’s stock has faced significant pressure as investor sentiment remains cautious.
While Q4 revenue exceeded expectations, the company’s guidance for Q1 2025 fell short of analysts’ projections. Rocket Lab expects revenue between $117 million and $123 million for the first quarter, significantly below the $135.7 million analysts had anticipated. The market reacted swiftly, with the stock dropping about as much as 11% in morning trading on Friday, Feb. 28 following the announcement. Moreover, the stock is down about 31% over the past month.
The Neutron Launch Vehicle: A Make-or-Break Moment
Rocket Lab stock had already been under pressure ahead of the Q4 report due to uncertainty surrounding its Neutron launch vehicle — a partially reusable, medium-lift rocket. On Feb. 25, Bleecker Street Research published a report alleging that Rocket Lab misled investors about Neutron’s likelihood of launching by mid-2025.
The report came amid a rapid rise in Rocket Lab’s stock over the past year, driven by excitement over Neutron’s development. Following the report’s release, shares dropped about 10%, contributing to an overall 31% decline in the past month.
Notably, Neutron is critical to Rocket Lab’s long-term strategy, as it will expand its addressable market and drive profitability. Neutron’s successful launch would allow Rocket Lab to expand its services beyond small satellite missions, capturing demand from commercial satellite constellations, national security contracts, and even interplanetary missions. The company emphasized that more than 10,000 satellites will require launches over the next five years, presenting a massive market opportunity.
Originally, Rocket Lab had projected that Neutron would launch by mid-2025. However, during the company’s Q4 earnings call, CEO Peter Beck acknowledged that the timeline may shift slightly, with the launch now expected in the second half of 2025. While some flexibility in scheduling is not uncommon in the aerospace industry, any prolonged delays could have financial implications for the company and its stock price.
Backlog Growth: Cause for Concern or Business Evolution?
Rocket Lab closed the fourth quarter with $1.07 billion in total backlog, split between $386 million in launch contracts and $681 million in space systems orders. However, the year-over-year backlog growth was a modest 2%, raising concerns.
However, investors should note that Rocket Lab’s contracts have become more complex, with larger, high-impact deals and strategic customer programs contributing to fluctuations in backlog growth.
A closer look reveals an interesting shift in the company’s contract mix. The launch segment saw particularly strong bookings, and this momentum is expected to continue as Rocket Lab moves forward with its Neutron launch vehicle pipeline. Although the backlog appears to be evenly divided between government and commercial clients, many of its commercial contracts are ultimately driven by government-related demand. This positioning provides a strategic advantage, especially in an environment where governments worldwide are ramping up investments in space while emphasizing cost efficiency.
Looking ahead, Rocket Lab’s growing pipeline includes multi-launch agreements and large satellite manufacturing contracts, which, due to their scale and complexity, may cause backlog growth to appear uneven from quarter to quarter. However, these contracts solidify long-term revenue visibility and potential upside. Investors should take note that nearly 50% of the current backlog is expected to convert into revenue within the next 12 months, reinforcing the company’s strong near-term financial outlook.
Smaller Launch Vehicles and Space Systems Business Remain Solid
While Neutron presents significant growth opportunities, Rocket Lab’s smaller launch vehicles continue to perform exceptionally well. In 2024, the company conducted a record 16 launches with its Electron and HASTE rockets. The company also secured over $450 million in new contracts, further strengthening its pipeline.
Rocket Lab plans to increase its launch frequency in 2025, targeting more than 20 missions.
Additionally, its space systems division remains robust, with over 40 spacecraft in various stages of production. By the end of summer 2025, the company expects to have significantly expanded its presence in orbit, reinforcing its leadership in satellite manufacturing and deployment.
Rocket Lab also recently signed an extended multi-launch agreement with Japanese earth-imaging company iQPS. Initially set for four Electron launches, the deal has now doubled to eight launches through 2025 and 2026, demonstrating the strong demand for its services.
The Verdict: Buy the Dip or Stay Cautious?
Rocket Lab presents a compelling investment opportunity, but not without risks. Wall Street analysts maintain a “Moderate Buy” rating on the stock, reflecting cautious optimism. The company has a solid foundation with a growing revenue base, strong demand for its existing launch vehicles, and an expanding footprint in the satellite industry.
However, the stock’s near-term performance hinges on Neutron’s development timeline. If the timeline is pushed further, investor patience may wear thin, especially given the significant jump in RKLB stock over the past year, leading to further declines.
As for long-term investors with a high-risk tolerance, Rocket Lab’s current dip may be an attractive entry point, particularly if the company continues executing its existing projects.
