Over the past year, space technology provider Rocket Lab (RKLB) has skyrocketed beyond expectations, with shares soaring 357% to a market capitalization past $9.8 billion. As the sector sees continued enthusiasm and success for private launch capabilities, a thorough examination of what’s next for would-be investors is critical. I have long been bullish on Rocket Lab, but with the financials now making sense, unlike in previous years, I suspect the rally might just be getting started.
To me, the fundamentals paint a picture of growing strength, which is a reason why I am bullish. Rocket Lab maintained a robust 26.7% gross margin in Q3, suggesting strong pricing power and operational efficiency even as the company invests heavily in new initiatives. This can be an expensive time in the growth story of a company, but fortunately, some healthy margins signal maturing manufacturing processes and increasing economies of scale taking hold.
As the frequency of launches from public and private space companies continues to increase, the latest earnings report reveals a business firing on all cylinders. Q3 revenue reached $104.81 million, a solid 55% jump from the previous year. More telling than the headline number is the firm’s successful evolution from a pure launch provider into a comprehensive space technology powerhouse.
Space systems now generate the majority of revenue at $83.9 million, while launch services contributed $21 million in the quarter. This shift toward space systems could prove to be particularly significant for investors, as it demonstrates an ability to reduce its dependence on launch frequency, all while capturing higher-margin opportunities by developing specialized spacecraft and components.
Potentially most compelling for me is the company’s substantial $442.39 million cash position, providing ample flexibility and resources to continue research and development, all while buffering against inevitable market uncertainties. With 12 launches completed so far in 2024, sending nearly 200 satellites into orbit, management continues to appeal to both commercial and government clients.
In Q3 alone, the company has secured $55 million in new contracts. Management is projecting Q4 revenue of between $125-135 million. More significantly, Rocket Lab’s total backlog has swelled to a healthy $1.05 billion, providing exceptional visibility into future revenue streams while demonstrating growing market confidence in the company’s capabilities.
