Where Will Rocket Lab Stock Be in 10 Years?

Long-term investing is the key to life-changing returns in the stock market because it smooths out the noise and volatility, allowing time for a stock's real growth thesis to take shape. This concept is especially true for companies like Rocket Lab (NASDAQ: RKLB), which are pioneers in relatively new opportunities.

Let's discuss the pros and cons of the space industrial start-up to decide what the next decade might have in store.

Why the space industry?

Nowadays, growth stock investors have a lot of places to put their money, ranging from generative artificial intelligence (AI) to robotics and even quantum computing. But space exploration stands out because it is a more proven opportunity.

Industry leader SpaceX is estimated to have earned revenue of $18.5 billion in 2025 alone. And with analysts at McKinsey and Company expecting the market to reach a trillion by 2025, there is plenty of room for smaller companies like Rocket Lab to follow in its footsteps.

Both companies use rockets to transport payloads into low Earth orbit (LEO) to serve government and commercial clients. These missions can include bringing satellites to space for GPS, broadband internet, or defense. But with a market cap of just $49 billion (compared to SpaceX's estimated $2 trillion), Rocket Lab allows investors to get in on the ground floor of the growth story. It also doesn't have SpaceX's arguably unwanted AI exposure caused by its acquisition of xAI in February.

Rocket Lab's finances are a mixed bag

When it comes to growth stocks, risk and potential reward usually come hand in hand, and Rocket Lab is no exception. The company's fourth-quarter (Q4) revenue jumped 36% year over year to $180 million as it launched a record of seven missions with its small launch vehicle Electron.

The company's top line is expected to continue expanding because of a slew of new launch contracts with government and commercial clients. This includes a $816 million deal with the Space Development Agency to help design a constellation of advanced missile-warning spacecraft. Revenue will likely be recognized over the next few years, and it highlights the company's ability to compete with established aerospace and defense contractors for the next-generation military technology.

That said, Rocket Lab's bottom line is much less exciting. The company is still quite far away from profitability, with operating losses of $51 million.

The good news is that this represents a slight decrease from the prior-year period, and it's mainly due to increased research and development costs as the company works to bring its new rocket platform, Neutron, across the finish line. Gross profits (which don't factor in research or office expenses) actually jumped 85% year over year to $68.2 million. The company has a clear pathway to profitability through more scale.

What will the next 10 years have in store?

Image source: Getty Images.

Over the coming years, Rocket Lab will have to grow into its valuation. While the company's $49 billion market value looks tiny compared to industry leaders like SpaceX, it is quite large relative to its sales and currently nonexistent earnings. With a price-to-sales (P/S) multiple of 79, Rocket Lab's shares trade at an immense premium over the S&P 500 average of just 3.5, and this leaves very little room for failure.

Valuation concerns may be solved with the launch of RockLab's medium-sized rocket Neutron. This vehicle will be capable of transporting payloads of 13,000 kilograms (28,660 pounds) into LEO, potentially giving the company the extra scale it needs to drive more revenue growth and potentially even profits when it arrives later this year. And while nothing is guaranteed, the company looks capable of delivering a multibagger over the coming decade if it demonstrates the ability to deliver on promises.

Will Ebiefung 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.