Could Buying Rocket Lab Stock Today Set You Up for Life?

Call 2025 "the year of Rocket Lab."

Over the past 12 months, shares of Rocket Lab (NASDAQ: RKLB), the tiny New Zealand maker of tiny Electron rockets -- turned end-to-end global space company and America's No. 2 rocket launcher -- have literally quintupled in value, soaring 435% through the end of last week to a stock market valuation of $25.4 billion.

Early investors in the Rocket Lab IPO have made out like bandits and are already probably feeling a bit wealthy, but what about the rest of us? Now that Rocket Lab stock has gone up so much already, many investors are wondering: Is it too late to get in? Or could an investment in this most exciting of rocket stocks still do the trick, and set you up for life, too?

Rocket Lab today

I recently did a more or less thorough rundown of what makes Rocket Lab more than just a rocket company, and I won't belabor the point by doing that all over again.

Suffice it to say that Rocket Lab's rate of Electron rocket launches has accelerated markedly in recent years and is still speeding up. The company's working on a newer, bigger, reusable rocket, Neutron, and hoping to get a first launch of that one off before the year ends. And Rocket Lab has a growing space systems business building everything from satellite parts to entire satellites and spacecraft -- that's now producing more revenue than its original rocket launch business.

Rocket Lab's past

How much has Rocket Lab grown? Here are a few numbers to illustrate:

Electron missions launched. Source: Rocket Lab.

With the year three-quarters over, it will be a stretch, but Rocket Lab still has a shot at hitting its target of launching Electron as many as 20 times before the close of 2025, plus closing the year with a bang -- and the first-ever launch of Rocket Lab's Neutron super-rocket.

The company has only reported financials for two quarters so far, but revenue looks on track for about $534 million this year -- below analyst forecasts for $588 million. Losses continue to rise despite gains in revenue; however, with Rocket Lab likely to lose as much as $254 million at its current pace (although analysts forecast only $218 million in losses).

Cash burn is intense. After a brief reprieve in 2024, the rate at which Rocket Lab burns through cash is accelerating in the final push to get Neutron ready to launch. Rocket Lab's on course to burn perhaps $276 million this year, although analysts hope they can hold that number down to $238 million -- still the most cash Rocket Lab has ever burned in a single year.

Rocket Lab's future

That's the bad news. Now here's the good: In August, Rocket Lab doubled down on its promise to launch its first Neutron rocket in 2025. And CEO Sir Peter Beck has promised that once Rocket Lab pivots from investing cash in developing Neutron to generating cash from launching Neutron, Rocket Lab's financials will quickly flip from red to black.

Analysts seem mostly on board with that assessment, forecasting Rocket Lab will approach break-even free cash flow next year, and turn free cash flow-positive one year later. Analysts haven't yet made projections on what will happen after that. Perhaps once we get a better handle on exactly what price Rocket Lab will charge for Neutron launches, we'll have a better idea of future cash-profitability.

Electron forecasts source: 7investing.com; Neutron forecasts source: Rocket Lab and Payload Space; financial forecasts source: S&P Global Market Intelligence.

Could buying Rocket Lab stock set you up for life?

That being said, already we have enough numbers to make an educated guess at Rocket Lab's long-term prospects.

Assume analysts are right, and Rocket Lab will earn $673 million in 2030. At its current market capitalization of $25.2 billion, that means Rocket Lab stock today costs 37 times its estimated profit five years from now.

That sounds expensive to me, but if Rocket Lab earns that much in 2030, and if Rocket Lab is still growing earnings rapidly in 2030, in line with the more than 100% earnings growth rate that analysts forecast, then even 37x 2030 earnings might not be too much to pay for the stock today.

These are very big "ifs," I admit. But if Rocket Lab does what analysts say it will do, then yes, I believe there's a chance that buying Rocket Lab stock -- even after its run-up -- could still turn out to be a very rewarding investment.

Rich Smith has positions in Rocket Lab. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.