I’m an investor too, but I think the first wave is pretty much over.
Now it might be time to start looking for an entry around $40 again.
I’m hearing that Wall Street is starting to sell off Rocket Lab as of today, mainly because of the uncertainty around Neutron.
If that’s the case, be ready for another drop. Don’t get caught thinking every dip is automatically a buying opportunity.
I think people are missing the forest for the trees with Rocket Lab, so here's my take.
First, look at the competitive landscape.
Meanwhile, the U.S. government has significantly expanded national security launch opportunities.
Imagine food delivery orders suddenly triple, but only one restaurant is actually open. That's essentially today's launch market.
Yet Rocket Lab dropped from around $151 to $65.
Sounds irrational?
Not really.
Rocket Lab didn't just announce an acquisition.
It announced an $8 billion acquisition of Iridium, a company that generates over $800 million in annual revenue while Rocket Lab itself still generates under $700 million.
On paper, the strategy makes sense.
Rocket Lab launches satellites.
Iridium owns one of the world's most valuable satellite constellations.
Instead of repeatedly paying another launch provider to replace its own satellites, Rocket Lab can eventually launch, build, and service that entire ecosystem itself.
That's vertical integration.
The logic is actually solid.
Because Wall Street doesn't buy stories.
It buys growth.
Rocket Lab was growing revenue at roughly 60% annually.
Iridium grows around 2%.
Combine them and suddenly the company's overall growth profile drops dramatically.
Growth stocks are priced on future growth.
Lower growth almost always means a lower valuation multiple.
Then comes financing.
Rocket Lab needs roughly $3 billion in cash for the deal.
It doesn't have that cash.
It secured a short-term bridge loan of roughly $3.6 billion that eventually needs long-term refinancing.
Higher interest rates.
Higher debt.
A company that still isn't consistently profitable.
Markets hate that combination.
Then timing made everything even worse.
SpaceX finally became investable.
For years, Rocket Lab benefited because many investors wanted space exposure but couldn't buy SpaceX.
Once that changed, part of Rocket Lab's scarcity premium disappeared overnight.
Growth multiple compression.
Massive debt.
Loss of scarcity.
Those three things hit almost simultaneously.
Many investors point out that Rocket Lab's Price-to-Sales ratio has collapsed.
But ask yourself why.
Part of it is because the stock fell.
That makes it cheaper.
The other part is because the denominator exploded after buying a company with much larger revenue.
That's not the same thing.
If a restaurant buys the restaurant next door with borrowed money, its revenue doubles.
That doesn't automatically make the business cheaper.
It simply becomes a different business.
Rocket Lab has years of launch backlog.
People celebrate that.
I don't.
A backlog is a signed contract, not recognized revenue.
And a meaningful portion depends on Neutron.
Neutron has never flown.
It's like a restaurant bragging about reservations before opening day.
Reservations don't prove the food is good.
Nothing matters more.
Not backlog.
Not analyst price targets.
Not launch demand.
Neutron.
Rocket Lab's future depends on successfully entering the medium-lift launch market.
Without Neutron:
Neutron has already been delayed multiple times.
Development isn't easy.
History also tells us that first launches fail surprisingly often.
Bear case
Neutron slips again or fails on its first launch.
Debt remains.
Iridium closes anyway.
Rocket Lab becomes a slower-growing communications company attached to a small launch business.
That could justify significantly lower valuations.
Bull case
Neutron reaches orbit.
Rocket Lab suddenly becomes one of the very few operational medium-launch providers in a market where competitors are delayed.
Iridium begins generating predictable cash flow.
Most importantly, Rocket Lab may no longer need to repeatedly issue new shares to finance growth.
That changes the business model entirely.
Many people call Peter Beck's stock sales a betrayal.
Maybe.
Or maybe he understood his own stock was trading at an extraordinary premium and exchanged expensive equity for a real cash-generating asset.
That's a much harder decision than most CEOs ever make.
Whether that turns out to be brilliant or disastrous depends almost entirely on what happens over the next few years.
I don't think the space industry is broken.
I think space stock valuations are.
Those are two very different things.
The market is pricing the Iridium acquisition almost entirely as a growth killer.
I think that's only half the story.
Rocket Lab didn't just buy a satellite operator.
It bought a potential cash-flow engine that could eventually end its dependence on constant equity dilution.
The problem is that getting from here to there requires surviving a very difficult transition.
Debt has to be refinanced.
Integration has to work.
And Neutron has to fly.
Miss one step, and the whole investment thesis changes.
For me, Rocket Lab isn't obviously cheap.
It isn't obviously expensive either.
It's simply one of the highest-conviction execution stories in the market.
When Q2 earnings arrive, I won't care much about quarterly revenue.
I'll be watching two things:
Everything else is just noise
Source: An insightful post from an investor on X, translated and expanded.