Rocket Lab USA (RKLB) may be one of the more exciting plays in the U.S. stock market, but its current valuation isn’t the most innovative use of capital. It’s not SpaceX, though it remains an underdog in the rocket industry with strong forward revenue growth—even as it continues to operate at a loss. The stock has absolutely crushed broader market indices, including the S&P 500 (SPX), over the past year.
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With so much bullish sentiment on show, a cooldown is likely to temper expectations, especially with all-important Q2 earnings figures just around the corner. With the 14-week RSI at 70, and overvaluation bells ringing, I think better entry points are likely ahead. Moreover, other stocks offer up a more compelling jump into space-age technology right now. Given the confluence of factors, I prefer to stay Neutral on RKLB.
Strong Growth Offset by Valuation Gravity
Rocket Lab has remarkable top-line growth, with forward estimates at 55% annual growth compared to 4.5% for the sector, representing a difference of over 1,100%. Looking at earnings per share relative to the industry at this stage of the company’s lifecycle is redundant because Rocket Lab is not yet profitable.
Here’s where things get tricky for Rocket Lab: its forward price-to-sales ratio sits at 37.5, compared to just 1.6 for the sector—a staggering 2,240% premium that far outpaces its growth advantage. That suggests investors are currently overpaying for the stock.
Management is aiming for positive free cash flow by 2026, driven by expected revenue of around $900 million and improving margins as the Neutron rocket enters the medium-lift market. GAAP profitability is more likely in 2027, though the first profitable quarter could arrive in late 2026.
Given this trajectory, the next 6–12 months could present a more attractive entry point—especially if the current bull enthusiasm fades and valuation cools.
Rocket Lab Soars Above Trend and Heads for Cooldown
Rocket Lab stock is currently trading well above its 50-week moving average, with a 14-week RSI of 70—right at the threshold that signals overbought conditions and a potential pullback. This doesn’t necessarily mark the end of the bull run, but it does suggest a pause is likely—something we’re seeing across high-growth tech stocks.
While macro headwinds like elevated interest rates and tighter Fed liquidity remain, you don’t need a deep economic analysis to see the case for caution: valuations alone tell the story.
Since April, the Nasdaq-100 (NDX) has surged nearly 40%. Its 14-week RSI is also nearing 70, and the index is well above its long-term trend line. This isn’t the time to be loading up on tech. It’s a time to trim, build cash, and wait for better entry points—Rocket Lab included.
Rocket Lab’s Growth Story and Valuation Risk Collide
Rocket Lab has already carved out a solid niche in the rocket industry, with its small-lift Electron rocket ranking as the second-most frequently launched rocket in the U.S. Now, management is aiming higher.
The upcoming Neutron rocket—a medium-lift, reusable vehicle slated for launch in late 2025—will open the door to larger commercial payloads, national security missions, and satellite constellation deployments. Neutron has already received qualification from the U.S. Space Force, setting the stage for potential military launch revenue.
That said, the bulk of Rocket Lab’s current revenue—roughly 70%—comes from its Space Systems division, which designs and manufactures satellite components and complete spacecraft. As of the end of fiscal 2024, the company reported a robust $1 billion backlog, evenly split between government (49%) and commercial (51%) clients, including major contracts with NASA and the U.S. Space Force. These deals reinforce Rocket Lab’s brand strength and give it a competitive edge in securing future business.
In short, Rocket Lab has a long runway for growth and a near-term path to profitability—making it a compelling story, if not for its currently stretched valuation.
Is Rocket Lab Stock a Good Buy?
On Wall Street, Rocket Lab stock carries a consensus Moderate Buy rating based on nine Buys, four Holds, and zero Sells over the past three months. RKLB’s average stock price target is $38.82, indicating a 15% downside potential over the next 12 months.
Even the high estimate of $51 indicates that the stock only has a 15% upside potential in the best-case outcome over the next 12 months. The lowest Wall Street estimate suggests a 35% or greater downside, meaning the risk-to-reward of RKLB stock is skewed negatively right now, predominantly due to valuation realities.
Rocket Lab Stock Will Come Back Down to Earth Soon
Rocket Lab is undoubtedly one of the most exciting companies around today, but the market clearly recognizes its strong and growing operational position. The stock price is indeed too high in my opinion, and even though I may be a buyer in the future, right now it’s best to let gravity bring the valuation back down to Earth.
I’m Neutral on Rocket Lab for now, awaiting a potentially better entry point in H2 2025, which could be timed perfectly before sentiment builds from the first medium-lift Neutron launch later in the year or in early 2026 at the latest.