Rocket Lab's Backlog Is $2.36 Billion -- More Than Double Its 2026 Revenue -- and the Stock Still Fell 38% This Month. Here's the Disconnect.

By most measures, Rocket Lab (NASDAQ: RKLB) shares should be well higher.

As of July, its backlog stood at $2.36 billion, or nearly 2.5 times this year's anticipated revenue of $959 million (which is up 59% versus last year's top line). The space-launch company has completed several more successful flights of its Electron rocket too, proving it's up to the task of putting smaller satellites into orbit.

And yet the stock's on pace to lose 16% of its value in October, leaving it 16% below 2025's closing price despite a fantastic midyear run-up. What gives? This action is a reminder that young story stocks, driven more by narrative than by numbers, can only do so much for so long.

Reality's making it easier to undermine

Simply put, Rocket Lab's business is cost-effectively putting satellites into space. Thanks to new technologies and materials, a handful of corporations can now offer what only government-run space agencies once could.

As of this month, Rocket Lab's partly reusable Electron rocket has been flown 98 times. This company also offers satellite tech, as well as satellite assembly services. This technology arm accounts for about two-thirds of its business, and it nearly doubled year over year in Q2.

It's all good news, so why is the stock's performance poor?

It would be naïve to pretend that repeated delays in the inaugural launch of its medium-lift Neutron rocket, capable of lifting more than 14 tons, aren't weighing on investors' minds. Initially expected to fly as early as 2024, developmental delays -- several of them just within the past few months -- have repeatedly pushed this date back.

Indeed, the company announced in mid-October that it won't be happening this year after all, but instead, sometime next year. Investors responded with the predictable sell-off.

There may be more to the matter than Neutron's developmental setbacks, though. Even if unconsciously, it's arguable that the market's realizes this persistently unprofitable company's stock is priced at 40 times this year's expected sales. Not earnings. Sales -- a detail that wasn't a concern just a few months ago.

Image source: Getty Images.

Whatever growth is in store, it's going to take a long, long time for RKLB's current price to make any sense. Its far bigger rival, Space Exploration Technologies (NASDAQ: SPCX), continues to refine its medium-lift launch capabilities in the meantime.

Handle with care

As outrageous as the revenue-based valuation seems compared to the S&P 500's trailing price/sales ratio of around 3.6, this sort of dynamic isn't unheard of for such businesses. It's kind of common, in fact, with new story stocks that attract lots of attention for reasons other than the potential profits that may or may not be on the table.

Those bullish underpinnings don't last forever without proper support, though. Eventually, investors start thinking about the numbers.

There's the rub with RKLB here and now. There's still some story for speculators to latch on to here. There are just fewer and fewer story-driven speculators left to latch on. That doesn't necessarily mean a story stock suddenly stops performing cold turkey. As time marches on, however, it certainly becomes more difficult to do so.

This doesn't mean Rocket Lab is strictly off-limits to interested investors. Just make sure you know what you're buying into and why it might still not behave like a more typical stock.

James Brumley 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.