Buy Rating Maintained Despite Revenue Miss
Bank of America has reiterated its Buy rating and $115 price target for Rocket Lab, signalling continued confidence in the space company’s growth prospects following its latest earnings report. Analyst Ronald Epstein said the target implies roughly 44% upside from the $80.04 share price referenced in the bank’s Aug. 10 report.
BofA described any potential weakness in Rocket Lab shares following the revenue shortfall as a “particularly attractive entry point,” citing strong growth in its Space Systems business, a record backlog and an improved third-quarter revenue outlook.
Space Systems Drives Growth
Rocket Lab reported second-quarter revenue of $234.1 million, representing a 62% increase from $144.5 million a year earlier. The result exceeded BofA’s $228 million estimate but came slightly below the $237 million Bloomberg consensus cited in the bank’s analysis.
The revenue gap was primarily linked to the company’s Launch Services segment, where revenue declined about 4% year over year to $44.6 million. Space Systems, meanwhile, delivered significant growth, with revenue nearly doubling to $189.5 million from $97.9 million in the same period last year.
BofA noted that Space Systems revenue substantially exceeded its $165 million estimate, supported by programs associated with the Space Development Agency’s Tranche II and III initiatives, along with demand for Rocket Lab’s spacecraft components.
Record Backlog Strengthens Outlook
The bank also highlighted signs that weakness in Rocket Lab’s launch business could be temporary. The company secured more than $437 million in new launch contracts across Electron, HASTE and Neutron during the quarter and subsequent period, taking its launch backlog beyond 90 missions.
Rocket Lab ended the quarter with a record total backlog of $2.36 billion, up 137% from a year earlier. About 45% of that backlog is expected to be recognised as revenue over the next 12 months, according to the company’s SEC filing. BofA estimates the figure at approximately 46%, supporting expectations for sustained revenue growth.
Improving Profitability
Rocket Lab also made progress on its bottom line. Its GAAP net loss narrowed to $49.3 million from $66.4 million a year earlier, while gross profit increased to $84.6 million from $46.4 million.
With Space Systems accelerating, launch contracts expanding and backlog reaching record levels, Bank of America believes the recent revenue-related weakness could offer investors an attractive opportunity to gain exposure to Rocket Lab’s longer-term growth story.
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