Cathie Wood Keeps Buying Rocket Lab Stock as It Trades at Less Than Half Its Record

Cathie Wood's ARK Invest has been buying Rocket Lab (NASDAQ:RKLB) on the way down. ARK's daily trade disclosures show three main waves since late August: 705,102 shares on Aug. 31 and Sept. 1, 359,612 on Sept. 22, and 233,482 on Oct. 1.

That comes to almost 1.3 million shares, worth over $85 million at the stock's prices on those days. And the stock closed at less than half its late-May record close of about $150 on all of ARK's buying days. Shares of the growth stock trade around $68 as of this writing, about 55% off that high.

ARK's three funds now own around 3.2 million shares, worth about $220 million. As I see it, though, ARK is mostly betting on a rocket the company hasn't flown yet.

Image source: Getty Images.

ARK's launch-shortage bet

In ARK's Oct. 5 newsletter, analysts Tasha Keeney and Daniel Maguire spelled out the case. If SpaceX scales its massive Starship rocket toward around 10,000 launches a year by 2030 and retires its Falcon 9 workhorse by the end of the decade, they wrote, the U.S. would hit a launch bottleneck.

They pointed to Rocket Lab and private Stoke Space as companies that could take share -- if their medium-lift rockets pan out.

Rocket Lab's entry is Neutron, a reusable rocket designed to carry about 13,000 kilograms to low Earth orbit for commercial and U.S. government satellite constellations. Of course, it hasn't launched yet.

Management describes the same shortage.

"The truth is that if you want to book a launch now or especially after 2029, the options are extremely limited," CEO Sir Peter Beck said on the company's second-quarter earnings call in August.

Is demand showing up?

Rocket Lab's own reporting shows the demand ARK is counting on. Highlighting how fast customers are signing on, total backlog reached a record $2.36 billion as of June 30, up 137% year over year. Launch backlog made up about $940 million of it, almost twice the $476 million at the end of 2025. Most of that rise came in the first quarter, when Rocket Lab signed 31 new Electron and HASTE contracts plus five dedicated Neutron launches.

And the bookings kept coming. A 20-launch Electron deal signed on Sept. 30 took Rocket Lab's launch backlog over 100 missions.

That said, Neutron's timeline is much less certain than its order book. Rocket Lab still aims to deliver the rocket to its launch pad in the fourth quarter. But its latest quarterly filing says the window for a launch before year-end is shrinking, and that timing hinges on qualification tests later this year. Kepler Communications' dedicated Neutron mission, booked in August, isn't scheduled before 2028. And Rocket Lab said that contract moved Neutron's manifest toward full capacity through the end of the decade.

Put another way, Neutron's problem looks less like finding customers and more like how soon, and how often, it can fly.

Shareholders are funding the wait

Meanwhile, the cash burn is speeding up. Rocket Lab's second-quarter free cash flow (cash from operations minus capital spending) was negative $110 million, versus negative $77 million in the first quarter and around negative $55 million in the year-ago quarter.

Management also expects its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) loss to deepen to between $17 million and $23 million in the third quarter, from $8.8 million in the second quarter.

Rocket Lab can cover it. It held $2.1 billion in cash and $258 million in marketable securities as of June 30. By mid-September, it had also brought in another $1.94 billion by selling about 29.3 million shares, to help fund its pending purchase of Iridium Communications.

But a lot of that money came from selling stock, so current shareholders are paying for the wait through dilution.

Including the new shares and its convertible preferred stock, a price near $68 gives Rocket Lab a valuation of about $46 billion.

Third-quarter revenue guidance of $250 million to $265 million points to a yearly pace of about $1 billion, so the stock trades at about 44 times sales.

Is ARK right to keep buying? On demand, I think Rocket Lab's own numbers back ARK up. But ARK's payoff hinges on a shortage it dates to the end of the decade, and on a rocket whose first flight still has no fixed date. At about 44 times sales, the stock arguably already prices in Neutron working.

I'd want to see Neutron fly before buying shares at this price.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.