Rocket Lab Just Delivered Record Results. So Why Is the Stock Sinking?

The space economy has captured the imagination of investors in a big way. The idea of getting in on the ground floor and reaching for the stars has a certain appeal. One company that has been making big strides in the "space" is Rocket Lab (NASDAQ:RKLB). The company bills itself as an "end-to-end space company," providing reliable launch services, complete spacecraft design and manufacturing, satellite components, flight software, and more.

Investors had set a high bar for Rocket Lab's quarterly financial report, and while the company delivered much of what Wall Street wanted, investors simply wanted more. However, shareholders shouldn't be too quick to dismiss the results. Management noted that Rocket Lab already has a running start for the next quarter, and the future looks bright.

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To infinity and beyond

For the second quarter, Rocket Lab reported record revenue of $234 million, up 62% year over year and $34 million higher than the record set in Q1. The company's net loss of $49 million improved from $66 million in the prior-year quarter. This resulted in a loss per share of $0.08.

For context, analysts' consensus estimates called for revenue of $231.6 million and a loss per share of $0.03, so the headline numbers were a mixed bag.

Looking beyond the top- and bottom-line numbers provides a wellspring of good news. Management noted that surging demand across all areas of the company's business fueled robust growth in Rocket Lab's backlog, which surged 137% year over year to a record $2.36 billion. The company added that, when combined with deals consummated since the end of the quarter, it booked more than $1 billion in new contracts across the company's launch and space systems already in Q3.

The company secured $437 million in new launch contracts across its Electron, Haste, and Neutron rocket launch vehicles in Q2 and in post-quarter signings, pushing Rocket Lab's launch backlog to its highest level in history, with more than 90 total launches.

Management also heralded two deals with the U.S. Space Force. The first is a $397 million contract to deliver multiple Flatellites -- flat, stackable satellites for its Space-Based Airborne Moving Target Indicator (SB-AMTI) program. The second involves two contracts to build three geostationary satellites -- which move at the same speed as the Earth turns, maintaining their position relative to Earth.

More to come

For the upcoming third quarter, Rocket Lab's forecast calls for revenue in a range of $250 million to $265 million, representing growth of approximately 66%. The outlook also calls for a gross margin of 30% and an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of roughly $20 million, both at the midpoint of its guidance. The top-line is well ahead of analysts' consensus estimates, which called for Q3 revenue of $235.9 million.

Unfortunately, the strong results and robust guidance weren't enough, as the stock fell as much as 8% in after-hours trading. It’s worth noting that Rocket Lab stock has gained 80% over the past year and currently sells for more than 65 times sales.

With a valuation of that magnitude, investors had set the bar high, and the bottom line failed to meet Wall Street's lofty expectations -- which explains the volatility.

That said, as the space race heats up, demand for Rocket Lab's services will continue to climb. As such, investors should continue reaching for the stars.

Danny Vena, CPA 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.