Rocket Lab: Do You Like To Buy Expensive, Overvalued Things?

2025-04-02 11:16:38 ET

Summary

• Rocket Lab's backlog has been flat for 5 quarters and Q1 FY25 missed revenue guidance. But there are positive catalysts ahead due to recent deal wins and satellite launches.
• The acquisition of laser optics communications company Mynaric AG is a smart move for vertical integration, bought at a rather reasonable price.
• RKLB is trading at a significant premium compared to peers, making it expensive even when comparing its EV/Backlog multiples with comps' 1-yr fwd EV/Revenue multiples.
• My RKLB vs SPX500 chart outlook suggests sideways price action ahead.
• The Neutron rocket launch in H2 FY25 is a key upside risk to monitor that can lead to a step jump in many financial metrics.

Performance Assessment

I held off on rating Rocket Lab ( RKLB ) a 'Buy' in my initiating coverage of the stock. It looks like that was a good decision. But given the extent of downside vs the S&P500 ( SPY ) ( SPX ) ( IVV ) ( VOO ), it was certainly a missed opportunity to rate it more accurately as a 'Sell':

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