The excitement around space exploration is reaching new heights. With visionary companies like Elon Musk's SpaceX and Jeff Bezos' Blue Origin leading the charge, what was once a government-exclusive venture is now being led by the private sector.
This shift has investors eager to jump on opportunities in the booming space sector. While SpaceX sparks a lot of enthusiasm, the company isn't planning a public stock offering anytime soon. However, one competitor is available for investors to buy today: Rocket Lab USA (RKLB -4.29%).
Rocket Lab has taken off in 2024, surging 409% as it continues to ramp up its launch cadence. Looking ahead to 2025, the company is positioned to grow its margins and profits. Here's why.
Its Electron is a top small satellite launch vehicle
Rocket Lab has become a go-to partner for companies launching small satellites into orbit. With its flagship rocket, the Electron, the space company has emerged as a top player in the industry and has the second-most-utilized orbital rocket in the U.S. Electron's smaller size makes it ideal for frequent and cost-effective missions for clients with small payloads. Since its inception in 2017, Rocket Lab has completed 57 missions, including 15 in 2024.
Rocket Lab competes with SpaceX's Falcon launch vehicle, but the race isn't close. SpaceX currently dominates the market, accounting for 98 launches, or a staggering 90% of the total launches by U.S.-based companies in 2023.
On the financial front, Rocket Lab USA is growing steadily. This year, the company has generated an impressive $304 million in revenue and $79 million in gross profit, thanks partly to its launch service business.
But that's not all. Rocket Lab has a bustling space systems business providing design and manufacturing services for spacecraft components. This segment alone contributed $220 million to revenue, making up 72% of its total gross profit through three quarters this year.
RKLB Revenue (TTM) data by YCharts
Looking ahead to 2025
One thing limiting Rocket Lab is its smaller Electron rocket. Although this smaller rocket means more frequent flights, the company earns less profit per launch. Its Electron launch vehicle earns roughly $7.5 million per launch. Rocket Lab is also limited from handling more lucrative civil and defense payloads, giving competitors like SpaceX a significant advantage.
However, Rocket Lab plans to debut its Neutron rocket, which it has been developing since 2021, in 2025. With a payload capacity of 13,000 kilograms, 60 times more than its Electron rocket, Neutron positions Rocket Lab to better compete head-to-head with SpaceX's Falcon 9 launch vehicle.
At $50 million and $55 million per launch, Neutron is set to unlock revenue and profit that is six times greater than Electron, paving the way for significant growth and expanding margins.
Recently, Rocket Lab made headlines by successfully firing its Archimedes engine for the first time at NASA's Stennis Space Center. This engine will power the first stage of its Neutron rocket, and the test validates the design and demonstrates the engine's operability. CEO Peter Beck believes this progress helps keep the company on track for a mid-2025 launch of the Neutron rocket.
Analysts forecast that Rocket Lab will generate $596 million in 2025, representing a robust 40% growth from this year's projected revenue. The company is expected to reduce losses from $186 million this year to a $145 million loss next year, with earnings projected to turn positive by 2027.
Image source: Rocket Lab USA.
Is Rocket Lab right for you?
Rocket Lab is making solid progress and is scheduled for a mid-2025 launch of its Neutron vehicle, which is promising news for investors. The company also boasts a robust backlog of $1.05 billion, representing contracts for future launch services and space systems work. This is up 80% year over year and shows strong demand for Rocket Lab's services.
The ongoing developments surrounding the Neutron vehicle are generally positive; however, any setbacks could potentially delay the company's profitability goals.
Rocket Lab stock has experienced notable gains this year and is currently valued at 23 times projected sales for the upcoming year. For this reason, the stock's high valuation and volatile nature aren't ideal for conservative investors prioritizing capital preservation.
That said, Rocket Lab presents an intriguing investment opportunity for investors with a higher tolerance for risk who are looking for long-term growth potential. Just be aware of the volatility and lack of current profits, and consider dollar-cost averaging into the position over time as Rocket Lab makes good on its long-term goals.
