peony
Equity Investor & Researcher
Rocket Lab is mispriced because the whole company carries an aggressive non-prime valuation when perhaps only a minority of it merits one. In a take described as devastating for Rocket Lab, the bulk of the business deserves a prime valuation and only a minority a premium non-prime one. That reverses this year's more interesting trades, where companies at prime-ish valuations held a large non-prime component. x.comÂ
Rocket Lab is rich at $40 billion but still a rare buy, since comparable space companies are SpaceX or Chinese firms. It trades near the levels of the middle of last year despite a historic year for space, and a company like it today would stay private until listing at $500 billion. Averaging back in rather than going all in. x.com x.comÂ
Rocket Lab still looks ridiculously expensive at 29 times forward sales against SpaceX at 22 times, even after a 65% fall. At 22 times, Rocket Lab would be roughly $38, and SpaceX would still be the pick. SpaceX also has better forward guidance; Rocket Lab's negative adjusted EBITDA makes sales multiples the valuation yardstick. x.com x.com x.com x.comÂ
Rocket Lab's valuation already more than bakes in space data centers. At a $74B market cap, over 74 times sales, Rocket Lab had better be building more than just data centers in space. This is a call on the price, not on the underlying quality of the business. x.com x.comÂ
Investors rotating into cheaper stocks with more upside should ultimately benefit Rocket Lab and AST SpaceMobile. Both have already suffered major drawdowns. x.comÂ
Rocket Lab's roughly $80 billion valuation, including its newly announced $3 billion dilution, would require $3-4 billion in profit to be reasonable, and there is no scenario where it earns $3 billion within three years. The market can stay illogical longer than expected, so it could still run 50% before crashing 80%; the same applies to AST SpaceMobile. x.com x.comÂ
Rocket Lab's valuation has gotten ahead of itself, and about $50 a share, or $30 billion, is a more sensible price. Projecting revenue several years out with strong execution and applying 20x sales is a useful check, but launching rockets is hard and demands a sufficient margin of safety; at 15x sales instead of 20x, fair value falls further. The stock may never get to $50, since stocks can stay expensive for long periods. x.com x.com x.com x.comÂ
Rocket Lab should double by June 2026 if SpaceX IPOs at around $1.5T, because as the clear number two with similar capabilities it is valued at only $38B, a gap that looks far too big. At $1.7T, SpaceX would trade at over 200x its roughly $8B in EBITDA, as reported on the All-In podcast, an insane multiple. x.com x.com x.comÂ
Repeated Neutron delays undermine the premium on Rocket Lab stock when execution keeps slipping. The company does not live or die by Neutron, but 50x sales was unjustified; even at 26x 2027 sales, a legitimate price suggests another 50% decline. x.com x.comÂ
Rocket Lab is still expensive at 30x next year's sales even after falling 60%. x.comÂ
Rocket Lab's selloff looks like overdone panic: it has extraordinary management and an effectively unlimited addressable market ahead, so discounts are good. x.comÂ
Rocket Lab is probably worth about $10 billion, far below the nearly $50 billion it trades at. @FindleysFinance notes trailing revenue of $769 million and operating cash flow of negative $222 million. x.comÂ
