Rocket Lab's Neutron Just Slipped Again. Here's the Only Date That Still Matters for Shareholders.
Key Points
Rocket Lab's Neutron rocket may not launch until 2027.
Also happening in 2027 is something even more important: Rocket Lab will acquire Iridium Communications.
With Iridium in-house, Rocket Lab will become profitable and free cash flow-positive.
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Uh-oh. Here we go again!
It's been nearly five years since Sir Peter Beck, the founder and CEO of Rocket Lab (NASDAQ: RKLB), announced plans to build a Neutron rocketship in 2020. The 43-meter-tall craft, incorporating an expendable second stage within a reusable first stage, can carry 13 tons of cargo to Low Earth Orbit -- 43 times the payload of Rocket Lab's current Electron rocket.
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Assuming, that is to say, it ever launches.
Rocket Lab, you see, has been promising to launch Neutron for years -- first positing a 2024 launch date, then "mid-2025," followed by late 2025, Q1 2026, and most recently late 2026. Last month, the deadline slipped yet again when Beck told investors on a conference call he was targeting "delivery of Neutron to the pad in Q4 2026."
That sounds like a reiteration of the late 2026 goal. Unfortunately, delivering the rocket to the pad is just the first step. Next follows a series of pre-launch tests preceding the actual launch.
And as a result, it's entirely possible we won't see Neutron take off before 2027.
Image source: Rocket Lab.
"An-ti-ci-pa-tion, anticipa-yay-shun! [Rocket Lab's] making us wait"
As you can imagine, investors in Rocket Lab stock are getting just a wee bit impatient with all the delays. And Rocket Lab stock is down 24% in the past two weeks, or nearly $20 per share.
The distress is understandable. (Still, one imagines they'd be even more upset if Rocket Lab moved too fast and launched a rocket that blew up!) Bearing that in mind, here's another date that Rocket Lab investors might want to focus on instead, just in case Rocket Lab has to delay launch yet again:
June 30, 2027.
What happens on June 30, 2027?
Three months ago, Rocket Lab announced it would acquire iconic satellite communications company Iridium Communications (NASDAQ: IRDM) in an $8 billion deal slated to close in "mid-2027."
Granted, that deadline's a bit fuzzy. But June 30, 2027, is about as close to mid-2027 as one can get, so that's the date I'm hoping we will see Iridium officially become part of Rocket Lab. And why is this important?
Why Iridium is important to Rocket Lab
Neutron is great and all, don't get me wrong. I'm personally looking forward to seeing it fly -- maybe even in person!
But as an investor, I realize that even the $50 million in revenue Neutron will bring to Rocket Lab with each flight, with 44% gross margins, pales in significance to the $884 million in annual revenue -- with 72% gross profit margins, according to data from S&P Global Market Intelligence -- that Rocket Lab will receive once it acquires Iridium.
Analysts forecast that in 2027, Iridium will earn more than $135 million in GAAP profit and generate more than $313 million in positive free cash flow. That's enough profit and cash to offset all the losses and cash burn at Rocket Lab, and turn Rocket Lab instantly profitable and free cash flow-positive -- a full year before Wall Street analysts anticipated that would happen.
To me, this makes June 30, 2027, the date to watch. Assuming Rocket Lab can close the deal on time, it'll be a much more attractive investment on that date -- with Neutron or without it.
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Rich Smith has positions in Rocket Lab. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.
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