Rocket Lab: A $515 Million Problem

2025-04-18 06:08:01 ET

Summary

• I'm concerned that Rocket Lab’s $515M SDA Tranche 2 contract could be at risk if the DOD opts to pivot toward SpaceX’s Starlink constellation.
• Furthermore, I see potential downside risks from the company’s ~80% reliance on defense spending, especially under the ongoing DOD's 8% annual budget cuts.
• Backlog growth stagnated in 2024, with only 2% growth, mostly tied to government contracts.
• I expect no meaningful revenue from Neutron until 2026, as the first launch was delayed and will be R&D-only.
• I wouldn't short Rocket Lab, as the company is showing spectacular revenue growth, and the reusable Neutron rocket could improve gross margins next year.

I perfectly remember when Rocket Lab USA, Inc. ( RKLB ) popped up in my momentum screener back in Q4 last year. I was considering betting on this stock for a couple of weeks in a row, but I ended up jumping on the Quantum wave instead (I am glad I did)....

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