Investing

Rocket Lab USA (RKLB) Price Prediction: Wall Street Expects a 25% Crash in 2025

Rich Duprey

Published: January 17, 2025 8:52 am

Last Updated: January 17, 2025 9:28 am

Jeff Bezos’ Blue Origin just made headlines by finally launching its New Glenn rocket after numerous failures, joining SpaceX in this new frontier of private space travel.

Yet another company has been routinely launching rockets into orbit, though it doesn’t grab nearly the amount of coverage as either of those two companies. Rocket Lab USA (NASDAQ:RKLB) is the second most-successful private space company after SpaceX, with 58 successful launches of its Electron rocket that has put over 200 satellites into orbit. Like SpaceX rockets, they are reusable as well.

Its next-generation Neutron medium launch vehicle is the next phase of opportunity. With a heavier payload, it has been selected to support NASA missions to the Moon and Mars, as well as being the first private commercial mission to Venus.

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Although 70% of Rocket Lab’s money comes from launch services, it is a complete end-to-end space company offering rocket design and manufacturing, satellite components, flight software, and more.

RKLB stock has taken off into the stratosphere as well, soaring 400% over the past year. Though shares are down almost 20% from their all-time high, Wall Street expects Rocket Lab to crash back to earth this year. Analysts have a one-year price target of $18.61 per share, implying a 24.5% decline in value. Let’s see if they are overcome by space sickness or if the stock can continue defying gravity.

Growing contract wins will narrow losses

It’s not just commercial and research-related launches Rocket Lab is involved with, but also Defense Dept. programs, particularly for hypersonic missile launches. Rocket Lab’s HASTE launch vehicle, or Hypersonic Accelerator Suborbital Test Electron rocket, was selected earlier this month to participate in the military’s MACH-TB five-year, $1.45 billion contract led by Kratos Defense & Security Solutions (NASDAQ:KTOS).

Rocket Lab has over $1 billion in contract backlog, up 80% year-over-year, half of which is expected to be received within the next 12 months. That would provide a significant boost to revenue, which over the first nine months of the current fiscal year totaled $303 million. Notably, Rocket Lab is able to collect up to 90% of the contract value for each mission before launch day, giving it a solid financial footing.

While it still loses money, with over 40% of revenue going to research and development, particularly on its Neutron launch vehicle, Rocket Lab should eventually become profitable. Where revenue surged 65% year-to-date, cost of revenue grew just 50% leading to losses that only negligibly widened from $132 million to $137 million.

Management forecasts fourth quarter revenue of $130 million at the midpoint of its guidance, more than double last year’s $60 million. It also foresees a slight improvement in adjusted EBITDA losses of $28 million versus the year-ago’s $29 million.

Key takeaways

The contract wins and improving financial picture does have Wall Street reassessing the opportunity. Both Stifel Nicolas and Goldman Sachs raised their price targets in January, with the former increasing its target from $26 per share to $31 a stub, or 15% upside, while reiterating its buy rating. 

Goldman Sachs maintained its neutral rating on RKLB stock, but nudged its outlook higher to $13.50 from $12 per share. The low end target of $6 per share placed by Morgan Stanley analysts last July serves as a drag on the consensus outlook, but as Rocket Lab continues proving the viability of its space program, Wall Street should come around.

Rocket Lab looks like it will maintain its orbit above Wall Street’s forecast, but having come so far so fast, it wouldn’t be surprising to see shares pullback. RKLB stock, though, still looks like a solid, long-term winner.