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Peter Beck's Rocket Lab Fell 30% in a Month While Revenue Grew 63%
Key Points
Rocket Lab stock fell sharply over the past month, despite a strong first-quarter earnings report.
Revenue surged 63% to a record $200 million as launch and space-systems demand grew.
Investors appear fixated on cash burn, but the long-term thesis rests on vertical integration eventually driving profitability.
Shares of Rocket Lab (NASDAQ: RKLB) had a rough summer. At one point over the past month, the stock was down more than 30%. Even after a rebound, it's still down about 13% over that span.
That dip comes even as the business continues to grow at a healthy clip. First-quarter revenue jumped 63% year over year to a record $200 million, driven by stronger demand for launch services and space systems.
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Rocket Lab also posted a narrower-than-guided adjusted operating loss and completed its acquisition of Mynaric during the quarter, expanding its operational footprint in Europe.
So why the sell-off? One reason is cash burn. Free cash flow was negative $77 million, a wider loss than analysts expected. The bull case is that Rocket Lab's vertically integrated model will eventually translate into consistent profitability. It isn't there yet, but the longer-term direction for Rocket Lab still looks constructive.
CEO Peter Beck called Rocket Lab "one of the only true end-to-end space companies on the planet." By controlling more of its supply chain, it can manage costs better than many competitors -- an advantage that should support healthier margins over time.
For long-term investors, the pullback looks like normal volatility. The core opportunity hasn't changed: Rocket Lab aims to take a larger slice of an expanding space economy that some Wall Street firms estimate could reach into the trillions over the next 20 years.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.