Rocket Lab's Neutron Won't Launch Until 2027. Is the Stock a Buy 65% Below Its Record?

Rocket Lab (NASDAQ:RKLB) won't launch its Neutron rocket this year. After the market closed on Oct. 14, the company said the medium-lift rocket's first launch is now expected to happen in 2027. Earlier this year, it had aimed for the fourth quarter of 2026.

Shares trade around $53 as I write, off about 10% from Wednesday's close. That puts the stock about 65% below its May 27 record close of $150.23.

When I covered Neutron's timeline in September, I said I wouldn't be surprised if the first flight slipped into 2027. This slip, though, matters beyond the launch calendar.

Rocket Lab's management has said the company's adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) should turn positive in the quarter after Neutron's first successful launch. Put another way, the delay also pushes back that milestone.

Image source: Getty Images.

A manufacturing setback

In a video shared with the update, CEO Sir Peter Beck said an inspection found voids (tiny air pockets) in the carbon composite of a newly built forward dome for Neutron's first-stage propellant tank. He said the voids didn't necessarily mean the dome would fail in flight, but the company is making another with a reworked manufacturing process.

Notably, Rocket Lab didn't name a new launch date. Beck said the company first has to build and inspect the new dome, then run the whole first stage through pressure and cryogenic tests. All going well, he expects that work to be done within the first quarter of 2027 -- and only after that does Rocket Lab expect to share a new target date.

The fourth-quarter target itself dated only to February, after a first-stage tank burst in a January pressure test.

Electron and space systems keep growing

The business Rocket Lab already runs, though, isn't slowing. Showing how fast it's scaling, Rocket Lab's second-quarter revenue climbed 62% year over year to a record $234 million. In the fourth quarter of 2025, revenue had grown 36%, so growth has accelerated sharply this year. Management also forecast third-quarter revenue of $250 million to $265 million, another record.

Most of Rocket Lab's revenue comes from space systems, the segment that makes satellites and spacecraft parts. Its second-quarter revenue surged 94% to $189.5 million, boosted by acquisitions. Launch services revenue fell 4% to $44.6 million due to revenue-recognition timing.

Electron, Rocket Lab's small rocket, is busy, too. It had flown 18 launches this year as of Sept. 26 -- versus 21 in all of 2025. And total backlog hit $2.36 billion at the end of June, more than double its level a year before.

When does Rocket Lab make money?

The trouble is that the growth still isn't profitable. Rocket Lab's adjusted EBITDA loss shrank to $8.8 million in the second quarter, from $11.8 million in the first quarter and $27.6 million a year before. But management guided for a bigger loss of $17 million to $23 million in the third quarter. Free cash flow, meanwhile, was negative $110 million in the second quarter.

On the second-quarter earnings call, CFO Adam Spice called Neutron's first successful launch the turning point. Adjusted EBITDA should turn positive the quarter after it, he said, and cash flow would probably turn positive 18 to 24 months after that, as Rocket Lab builds a fleet of Neutron rockets.

With first-stage testing due to last into the first quarter, the EBITDA turn now looks unlikely before the second half of 2027, and positive cash flow might slide toward 2029.

Granted, the pending purchase of Iridium Communications, expected to close in mid-2027, could reset that picture, as Iridium produces a lot of free cash flow. But Rocket Lab sold $1.94 billion of new stock to help fund that deal.

At roughly $53 a share, Rocket Lab trades at about 35 times sales (using the $1 billion annual revenue rate its third-quarter guidance points to). It was about 44 times sales at last Friday's close. (That includes September's new shares plus the company's convertible preferred stock, for a market value of about $36 billion now.)

Does a 65% fall make the stock a buy? Not for me.

The operating business keeps setting revenue records, and the stock's much cheaper than it was in May. But at around 35 times sales, investors are arguably still paying for Neutron to fly often and profitably. And the launch that management links to positive adjusted EBITDA no longer has a target date.

Until Rocket Lab puts a new launch date on the calendar, I'd view the stock as too pricey for what it has proven so far.

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.