Is Rocket Lab Stock Ready For A Neutron Delay

Rocket Lab (RKLB) stock trades at 52.6 times sales, compared with 3.1 for the S&P 500. The case for paying that price may rest partly on Neutron, the company's larger new rocket. A September 21 report citing Cantor Fitzgerald named the vehicle as a coming boost to revenue. During an August 10 call, management said the window for a launch by the end of 2026 was narrowing. So what would a late Neutron cost Rocket Lab?

At Its Latest Pace, Waiting Costs $110 Million Quarterly

A delay in Neutron would likely extend Rocket Lab's unprofitable period, as management has targeted positive adjusted EBITDA shortly following the rocket's transition to regular commercial service. Reaching positive cash flow will take an estimated 18 to 24 months beyond that milestone, stretching the total pre-break-even cash burn across several more quarters. Until then, the company continues to spend more cash than it brings in: $0.4 billion more over the last twelve months.

Free cash flow was a use of $110.1 million in the second quarter, meaning Rocket Lab spent that much more than it collected. Management expected that figure to stay at elevated levels in the third quarter, a period that has ended but not yet been reported. At the close of the second quarter, Rocket Lab held roughly $2.4 billion in cash and securities. Each quarter of delay at that pace would use under 5% of that cash. Part of that cash is already spoken for. Management said the $1.08 billion raised by selling shares in the second quarter is meant partly for acquisitions, including the announced purchase of Iridium. Even so, a delay looks like a matter of patience for Rocket Lab rather than one of survival.

Shareholders may need more patience than the company itself. During the 2022 inflation shock, Rocket Lab stock fell 70%, against 24% for the S&P 500.

Where Rocket Lab's Revenue Already Comes From

Rocket Lab already generates most of its revenue outside of launches. Space Systems, the segment that includes satellite manufacturing, brought in $189.5 million of the $234 million Rocket Lab reported for the second quarter. The company's smaller active rocket, Electron, also keeps adding work. On September 30, Rocket Lab signed a 20-launch contract with Synspective, marking its largest commercial Electron deal.

The company finished the second quarter with about $2.36 billion in backlog, representing work signed but not yet delivered. Management expects about $1.1 billion of that total to become revenue within the next twelve months. That figure is more than the $0.8 billion Rocket Lab reported over the last twelve months. Launches make up about 40% of that backlog. Launch bookings signed in and since the second quarter include Neutron, the rocket whose timing is in question.

Rocket Lab has also narrowed its losses. Operating loss stood at 29% of revenue over the last twelve months, compared with 44% a year earlier.

How Rocket Lab Holders Will Know If Neutron Slips

The first sign of a delay would emerge at the launch site. Management targets delivery of Neutron to the pad in the fourth quarter of 2026. Stage testing follows, a phase when the engines fire on a fully fueled vehicle for the first time.

The next financial indicators arrive in Rocket Lab's third-quarter report. Management guided revenue of $250 million to $265 million, along with an adjusted EBITDA loss of $17 million to $23 million. Free cash flow in that report is the figure to watch, because it represents what each quarter of waiting costs Rocket Lab.

Does This Mean You Should Act On RKLB?

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