Rocket Lab can successfully transition from a smaller rocket launcher to a full space system provider with larger payloads with high margins.
Rocket Lab (RKLB) $73
Industry/Sector/Type - Space exploration/commercial/secular growth/high risk-high reward
Biggest catalyst for the stock - Increased participation in higher revenue generating full system services in a fast growing space commercialization market.
Possible duopoly: The commercial space satellite sector has the potential to become a duopoly between the Elon Musk led Space X (SPACE) and Rocket Labs, (RKLB) with UAL taking a likely backseat and getting slotted as a legacy player.
Strong order backlog: Space X is currently 25 times larger but RocketLabs’ order backlog of $1.9Bn and 5-year sales forecasts of 30% revenue growth are extraordinary, giving it a good chance to secure a strong and enduring foothold in the industry. On Dec 19th, The U.S. Space Development Agency gave it a multi-year contract of $805Mn for 18 missile warning, tracking and defense satellites.
The first mover advantage: Barriers to entry are high with specialized Research and Development, and Capex requirements. Government contracts take time but are often sticky and switching costs for multi year contracts are, which give these two a huge first mover advantage.
Higher margin revenue: Rocket Lab has successfully grown from the small sized launches to qualifying for larger payloads (500Kg and higher segments)
It has a growing share of revenues from space systems instead of just rocket launches, which will increase both revenue growth rates and eventually margins.
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Rocket_Lab_Revenue_Segments[/caption]
Launch Services are a smaller part of full space systems and while Rocket Lab's roots have been in providing small payload (below 500Kg) launches, as we can see from the table above, Space Systems revenue grew to $114Mn in the last quarter, 2.7x Launch Services revenue.
This is an excellent video with Rocket Lab's CEO.
Given the growth possibilities, and the nascent stage of this industry, I believe Rocket Lab has the potential to attract a premium multiple for the next 3-5 years.
Large TAM: Reports from Johns Hopkins and McKinsey indicate that the Total Addressable Market will expand from the current $630 Bn in 2024 to $1.8Trn by 2035. That's a CAGR of 10%.
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Space_Commercialization_TAM_Growth[/caption]
The two big use cases are what McKinsey calls a) “backbone” applications—such as those for satellites, launchers, and services like broadcast television or GPS and b) “Reach” with big use cases coming from satellite GPS communications (Uber), T-Mobile and GPS and exploration.
There is another school of thought that this could become a space race between US and China, essentially ensuring sustainable and recurring demand for leading players like SpaceX and Rocket Lab.
The other big catalyst is the reusability of launchers as shown by Rocket Lab's Hungry Hippo, bringing costs down and expanding the market further.
Execution is crucial: The company has reached qualifying with the "Neutron" run with higher payloads but will need to scale and execute it flawlessly for cost efficient launches to grow its Space Systems segment. I don't see it achieving its revenue goals without doing so, and we could see a sharp drop should these be delayed or fail.
The Hungry Hippo system also must continue to ensure recoverability to reuse sections for other flights - the entire thesis of reducing production costs depends on it.
I also believe that we'll need to see more visibility in large scale commercial adoption of medium-class satellites.
Overpriced: Whew! The stock has jumped from $54, on 12/17 to $73 on 12/19, Friday, perhaps because of The U.S. Space Development Agency contract.
I had posted the Buy trade alert on 12/5/2025 for RKLB at $48.69, and I’m kicking myself from not buying more.
However, now I worry that all the good news is already priced in, and the stock could easily retrace or stay range bound till the fundamentals catch up with the valuations.
I also suspect that given the short interest ratio of 8%, some of the rise was short covering, and it won’t be forthcoming.
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Rocket_Lab_Space_X_Valuation[/caption]
As we see from the table above, Rocket Lab is far from cheap, with a price to sales ratio of 37, comparable to the much larger Space X, which is valued at $800Bn or 40x forecasted 2026 sales. I would estimate operating profitability about 2 years out, so this is most definitely not a bargain.
Still, given the potential and the possibility of sustained revenue, significant barriers to entry and a possible duopoly, I would buy more on declines.
Nebius' masterly execution as an integrated neocloud player allows it to borrow at very cheap interest rates with very little shareholder dilution.
Nebius is executing brilliantly as an integrated neocloud player with tremendous reach, value addition and strong pricing power.
