To The Moon

$Rocket Lab USA, Inc.(RKLB)$

Rocket Lab has just released its latest earnings figures, and despite the market’s reaction—where the stock has dropped approximately 13–14% at the time of this recording—it was trading closer to the 200-day moving average. We'll discuss that in more detail later in this video.

Overall, the quarterly results and management's comments were in line with expectations. The stock, however, had surged significantly in recent months, much like many other space and speculative stocks, rising 200–300% without much justification. I didn’t take any profits around the $30 mark, so my gains have taken a hit. However, since this was a small position to begin with, I plan to add more shares following the recent dip, and I’ll explain why throughout this video.

The current market environment is highly volatile. Tech stocks, in particular, seem to be out of favor, with investors shifting focus away from cloud computing, AI, and SaaS. It almost feels like the market is moving backward, preferring traditional industries over innovation. For example, Nvidia saw an 8.48% drop despite delivering another outstanding quarter, which simply doesn’t make sense to me. But sometimes, the market behaves irrationally.

There are also macroeconomic factors at play. With key economic data expected on Friday, market sentiment remains uncertain. Consumer confidence appears weak, yet financial and healthcare stocks haven’t taken the kind of hit one would expect if consumer sentiment were truly that bad. Just a few months ago, weak economic data led to stock market rallies on the expectation of interest rate cuts. That dynamic no longer seems to be working. I personally believe we’ll see more than two rate cuts this year, though I acknowledge my Nvidia prediction was way off.

But let’s get back to Rocket Lab. If you enjoy these types of article, don’t forget to like and subscribe—it really helps. And if you’d like to support me further.

Now, onto some key company updates:

• Rocket Lab has launched over eight missions for constellation operators in 2024 as part of multi-launch contracts for its Electron rocket.

• The company remains on track to deploy an entire satellite constellation in under a year, with eight dedicated Electron missions already scheduled through 2025 and 2026.

• In the hypersonic market, Rocket Lab successfully launched two HASTE missions within 21 days in Q4, with five more planned for the U.S. Department of Defense.

• The company was also selected by KATOs to participate in the extended $1.45 billion MACH-TB 2.0 hypersonic test program over a five-year period, though this has yet to be reflected in its backlog.

As for Neutron, the company’s next-generation rocket:

• The launch site is nearly complete and is expected to be operational in Q2 2025.

• There is a growing demand for national security launches, and with limited available options, Rocket Lab sees Neutron as a key solution to this bottleneck.

• The rocket will also be critical for launching and operating Rocket Lab’s future satellite constellation.

One reason for the stock’s decline may be the slight delay in Neutron’s debut launch, now scheduled for the second half of 2025 instead of mid-2025. While this was a hot topic during the earnings call, the company emphasized that the goal is not just to launch, but to reach orbit successfully. A delay of just a couple of months for such a significant milestone is not a major concern in my view. The fact that Neutron is still expected to launch in 2025 is impressive.

Lastly, Rocket Lab introduced "Flatte," a low-cost, mass-manufactured satellite designed for large constellations. This isn’t just another product—it represents a strategic shift toward becoming a fully integrated space company, operating its own satellite constellation and delivering services from orbit.

During the earnings call, Rocket Lab didn’t provide much additional information. They’ll likely share more details in the future, possibly during analyst conferences or in upcoming quarters. That said, this latest announcement aligns perfectly with their long-term vision—to become a fully integrated, end-to-end space company. Introducing a product like this makes sense for their strategy.

Earning overview

Rocket Lab (NASDAQ: RKLB) reported strong growth in Q4 2024, with a record revenue of $132.4 million, a 121% increase from the same quarter in 2023, and a full-year revenue of $436.2 million, up 78% year-on-year. However, the company posted a GAAP loss of $0.10 per share, in line with expectations but indicating ongoing profitability challenges. Despite the loss, Rocket Lab made notable strides in its space operations, including 16 successful Electron rocket launches and advancements in its Neutron rocket program, set to debut in 2025. The company also introduced its Flatellite satellite platform for high-volume production. Looking ahead, Rocket Lab expects Q1 2025 revenue to fall between $117 million and $123 million, below analyst expectations, leading to a cautious outlook. While analysts remain optimistic about the company's long-term potential, there are concerns about its near-term financial performance.

Revenue & Gross Margin

Quarter-over-quarter revenue increased 23.3%, rising from $104.8 million to $132.45 million. Year-over-year Q4 revenue grew 120.7%, with a 26.3% quarter-over-quarter increase, equating to $27.6 million. This was driven by an increase in launches (from three to five) and strong growth in their Space Systems division, primarily from higher revenue recognition under their SDA contract. Full-year 2024 gross margin improved, mainly due to a higher launch cadence, though it was slightly offset by an unfavorable mix shift in their Space Systems business. Q4 gross margin gains were attributed to an increase in launch cadence and a more favorable mix within their satellite manufacturing segment.

Backlog & Business Breakdown

The company’s backlog saw modest quarter-over-quarter growth. Here's the breakdown:

• Launch Services: 36%

• Space Systems: 64%

• Customer Base: 49% government contracts, 51% commercial contracts

About 50% of their Q4 backlog (a little over $1 billion) is expected to be recognized within the next 12 months, with the remainder projected beyond that timeframe.

Cash Flow & Profitability Trends

RKLB saw a decline in free cash flow, with a negative $80.29 million in free cash flow reported for the quarter ending September 30, 2024. This trend of negative cash flow persisted throughout the year, culminating in an annual free cash flow of -$150 million for 2023, slightly worse than the previous year’s -$149 million. Despite achieving record revenues in Q4 2024, Rocket Lab faced cash flow challenges due to increased operational and capital expenditures associated with its ambitious growth initiatives.

GAAP operating cash flow is nearing break-even, though capital expenditures in property, equipment, and software remain a factor. Adjusted EBITDA loss improved by $7.7 million sequentially, largely due to higher revenue. Cash consumption from operations decreased by $28.5 million, driven by milestone payments in satellite manufacturing.

Q1 2025 Outlook

• Revenue: Expected between $117 million and $123 million, slightly below market expectations.

• GAAP Gross Margin: Projected at 25–27%.

• Non-GAAP Gross Margin: Expected between 30–32%.

• GAAP Operating Expenses: Forecasted at $93–95 million.

• Non-GAAP Operating Expenses: Estimated at $77–79 million.

• Adjusted EBITDA Loss: Predicted at $33–35 million, marking an increase quarter-over-quarter.

While Q1 will likely see a decline compared to Q4, it remains positive on a year-over-year basis. The market had expected stronger guidance, but the real focus remains on the Neutron rocket program, which is expected to gain momentum later this year. In the meantime, Rocket Lab will continue launching Electron and HASTE missions.

Stock & Market Sentiment

At present, Rocket Lab’s stock is approaching its 200-day moving average at $16.34. Before earnings were released, I estimated a potential decline of around 18%, which we hit at one point after hours. A few weeks ago, this would have resulted in a much steeper drop, but I actually prefer the stock here rather than when it was trading at $30.

Looking ahead, I still see Rocket Lab as a company with significant long-term potential. The Neutron rocket will be a game-changer, fundamentally altering the company’s economics compared to the Electron. The first Neutron launch won’t be recovered, but subsequent launches will attempt recovery on their landing pad—fittingly named "Return on Investment."

Yes, the first launch was delayed slightly, now scheduled for the second half of 2025 instead of mid-year, but a delay of just a few months isn’t a major concern. The long-term growth potential remains intact.

Conclusion

The market has been rough lately, and it's not always easy to watch your portfolio decline. But historically, these are the times when great opportunities arise—when solid companies remain unchanged but their stock prices drop, allowing investors to accumulate more shares at better prices. Having cash on hand to take advantage of these dips is key.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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