Analysts reboot Rocket Lab’s stock price target after earnings

If you haven’t seen an elephant fly, would you settle for a hungry hippo?

Hungry Hungry Hippos was a table-top game Milton Bradley released in 1978 that entertained a generation of kids and spawned a 2012 film by the same name.

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Hungry Hippo is also the name of the protective nose cone for Rocket Lab USA’s  (RKLB)  Neutron rocket, the aerospace company’s partly reusable medium-lift two-stage launch vehicle.

During Rocket Lab’s fourth-quarter earnings call, Peter Beck, the company’s founder and chief executive, told analysts that the massive reusable nose cone halves were “one of Neutron’s most exciting and novel features.”

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“We’re testing like we’re flying, opening and closing the Hungry Hippo at full speed to understand exactly how they behave,” Beck said. “And I was glad to say I was there in person for the first lot of testing, and I can tell you that it’s a wonderful sound to hear the Hungry Hippo in action.”

Slowing down a little bit, Beck told analysts about Neutron, which was originally expected to launch in 2024 but is now projected to take off in mid-2025.

Rocket Lab CEO Peter Beck says this is the year of Neutron. (Photo by Phil Walter/Getty Images)

Phil Walter/Getty Images

Rocket Lab CEO: Neutron rocket a ‘monopoly breaker’

“This is the year of Neutron, our monopoly breaker to unlock the bottleneck of medium launch,” Beck said.

He said that more than 10,000 satellites need to launch in the next five years, ranging from commercial constellations as well as national security and defense missions and interplanetary exploration.

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“The need is clear,” Beck said. “So, I won’t labor on it other than to say that the industry is crying out for more launch options in this class and Neutron is coming to market in a record time to deliver it. Neutron is also critical to us launching and operating our own future satellite constellation.”

Short-seller Bleecker Street disputes RLAB schedule

However, analysts at Bleecker Street Research, a short-selling investment firm, disputed the company’s launch schedule for Neutron. 

“We believe that RKLB has materially misled investors about the likelihood that its Neutron rocket will launch in mid-2025, a timeline the company has repeatedly claimed in media interviews and on earnings calls,” the firm said. 

“In fact, rocket experts we spoke to put the timeline of a rocket launch from mid-2026 to mid-2027, a one to two year delay,” Bleecker Street said.

Short sales are bets that a security’s price will decline.

The firm said that many aspects of the Neutron program remain far behind where they need to be.

This includes engine development, engine and structure production, launch pad construction, rocket transport to the launch site, Bleecker Street said, citing a review of documents and 23 interviews with industry experts, including former Rocket Lab engineers and executives.

Rocket Lab did not immediately respond to a request for comment.

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“We’ve always been clear that we run aggressive schedules, and that gets us to the pad on a rapid time frame, but of course nobody wants to get the rocket faster to the pad than I do,” Beck told analysts.

Rocket Lab, Long Beach, Calif., reported a quarterly loss of 10 cents a share, in line with analysts’ consensus forecast and matching the year-earlier figure. 

Revenue totaled $132.4 million, which surpassed the estimate of $130 million and more than doubled (up 121%) from a year earlier.

Looking ahead, Rocket Lab forecast first-quarter revenue of $120 million, which was 13.4% below analysts’ estimates.

Analyst cites push out of Neutron timeline

“Once again, we’ve maintained our position as the leading small launch provider globally and the second most frequently launched US rocket annually,” said Beck, whose company came in behind Elon Musk’s SpaceX. 

The company’s stock has soared 330% from a year earlier and is off 22.5% since January.

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Several investment firms issued research reports after Rocket Lab released its quarterly and full-year results 

Stifel lowered its price target on Rocket Lab to $27 from $31 and affirmed a buy rating on the shares.

The investment firm said a “solid” Q4 was overshadowed by softer Q1 guidance and the “slight” push out of the Neutron timeline to the second half of 2025. 

But Stifel said any pullback “creates a better entry point for investors” as growth will resume in the second quarter and accelerate in the second half. 

The introduction of a low-cost, mass-producible satellite for large constellations “could be a game changer in the industry” Stifel said, adding that it still sees Neutron as “a key catalyst” that will open up a much larger total addressable market.

KeyBanc: Long-term Rocket Lab thesis intact

KeyBanc analyst Mike Leschock lowered the firm’s price target on Rocket Lab to $28 from $32 while reiterating an overweight rating on the shares. 

The analyst cited the lower first-quarter revenue baseline, but its long-term thesis remains intact. 

Neutron’s first launch timing is now second-half 2025, which Leschock says expresses management’s confidence in where Rocket Lab is in the production and testing processes and its ability to meet qualifications/milestones in a timely manner. 

The analyst said Rocket Lab was on track to follow a similarly aggressive growth trajectory as SpaceX has, and the company is positioned to be an industry leader in both launch services and satellite manufacturing and design.

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Citi analyst Jason Gursky pared the firm’s price target on Rocket Lab to $33 from $35 and maintained a buy rating on the shares. 

Gursky said he hasn’t come across a space program that hasn’t been delayed, and Rocket Lab’s Neutron is no different, with first launch now slated for H2 2025.

This represents a roughly 12-month push from original target, and it would not surprise the firm to see further delays as more testing is done, the analyst said.

Gursky said the shares were likely to sell off following the news. It would use any weakness as an “enhanced buying opportunity” since it expects Neutron to eventually make it to market and “garner its fair share.”

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