Is Rocket Lab Stock a Buy Now?

Source The Motley Fool

The space economy is a fascinating investment opportunity, but there are limited pure-play space stocks to choose from. Elon Musk's SpaceX is the industry leader by a wide margin, but it's not publicly traded. Rocket Lab USA (NASDAQ: RKLB) has emerged as a hot alternative. The stock has rocketed higher over the past year. Shares are down 40% from their high, and Rocket Lab is still up nearly 350%.

Space is far more than hype; according to Accenture, the space economy could grow to $1.8 trillion over the next decade, with more than 60,000 satellites in orbit by 2030.

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Is Rocket Lab for real, or is this company bound to fail in SpaceX's shadow? Here is whether investors should buy the stock now.

A smaller space company that's preparing for takeoff

SpaceX was valued at $350 billion earlier this year and is the world's leading space launch provider. It's also known for its satellite constellation, Starlink, which provides internet services worldwide. Rocket Lab is a small fish, relatively speaking, with a market cap of $8 billion today.

Rocket Lab specializes in small payload space launches utilizing its Electron rocket. It has conducted 62 total Electron launches, including 16 in 2024, up from 10 in 2023. Rocket Lab has ambitious plans to act as an end-to-end space systems provider, meaning it's involved in launch services, spacecraft and satellite design and manufacturing, and flight services and software. It's like a one-stop shop for effectively and safely delivering objects to space.

Total revenue was $436 million in 2024, and analysts estimate it will double to approximately $894 million by 2026. Rocket Lab's Neutron rocket will be crucial to that. Neutron is a partially reusable rocket designed for larger payloads than Electron. Essentially, Neutron represents Rocket Lab stepping into a higher weight class that will see it compete more directly with SpaceX.

RKLB Revenue (TTM) Chart

RKLB Revenue (TTM) data by YCharts

Rocket Lab hopes to conduct Neutron's debut launch later this year. Rocket Lab and Neutron are in the running to win launch contracts with the U.S. Space Force that could run through 2029 and total $5.6 billion in value. The company ended 2024 with a $1.067 billion backlog split pretty evenly between commercial and government clients.

Ultimately, Rocket Lab's ability to execute its launches and develop this technology will determine how well it competes with SpaceX and how the business will do over the coming years. If space becomes a multitrillion-dollar industry, there will be no shortage of opportunity.

Here is a key risk investors need to look out for

Rocket Lab is still a young company with much to prove, but it tells a great story. Investors have a solid long-term investment thesis here, but they shouldn't lose sight of share dilution and how it could impact the stock's long-term performance. The company is burning through cash, spending heavily on research and development, manufacturing costs associated with building satellites and rockets, and acquisitions.

In 2024, Rocket Lab's free cash flow was negative $116 million. Cash losses are typical for a young company, but investors should look for improvement as the business grows to avoid excessive dilution. Remember, the more shares there are, the smaller a stock's per-share revenue and earnings will be, meaning lower investment upside.

To management's credit, it seems it has tried to keep dilution down. The diluted share count has only risen by 10% since the company went public via a special purpose acquisition company (SPAC) merger in 2021. However, dilution looks set to pick up. The company has accumulated $401 million in debt, so investors should probably anticipate management raising funds via stock offerings more so than debt moving forward. Rocket Lab recently announced a $500 million share offering, equal to about 6.25% of its current market cap.

Is the stock a buy now?

Rocket Lab's most direct comparison would be SpaceX. According to Bloomberg, SpaceX obtained a $350 billion valuation in early 2025, valuing the launch portion of the business at $122.5 billion. A research report by Payload Space, Estimating SpaceX's 2024 Revenue, estimated the company's 2024 launch revenue at $4.2 billion. Again, these are estimates, but the numbers value SpaceX's launch business at a price-to-sales (P/S) ratio of roughly 29.

Today, Rocket Lab's P/S ratio is 21. Investors should consider that SpaceX is more established and deserves a premium as the dominant industry leader. However, those willing to take a long-term view on the stock could argue that Rocket Lab is buyable at its current price. Doubling its revenue by 2026 would mean the stock's valuation becomes much cheaper over the next two years.

Consider Rocket Lab a speculative investment that should remain a relatively small position in a diversified portfolio. Still, the stock is buyable here and has some solid upside over the next five years if it can get Neutron up and running.

Should you invest $1,000 in Rocket Lab USA right now?

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Accenture Plc. The Motley Fool recommends Rocket Lab USA. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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