Rocket Lab USA Inc. shares surged 72% in three months, but Zacks Investment Research rates the stock a Sell, citing Neutron development risks and a premium valuation.
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Rocket Lab stock jumps 72% as Zacks flags Neutron risks
Rocket Lab USA Inc. shares surged 72% in three months, but Zacks Investment Research rates the stock a Sell, citing Neutron development risks and a premium valuation.
Rocket Lab USA Inc. shares surged 72% over the past three months, outperforming the Zacks Aerospace-Defense Equipment industry's 0.8% decline.
"Despite broadening its capabilities through strategic acquisitions and deeper vertical integration, Rocket Lab still faces risks tied to Neutron execution, supply-chain availability and exposure to government-funded programs," Zacks Investment Research said in a June 3 note, assigning a Rank #4 (Sell) to the stock.
The company trades at 67.12 times forward sales, a premium to the industry's 12.75 times. Its trailing 12-month return on invested capital remains negative, lagging peer averages. The Zacks consensus estimate for 2026 earnings per share has declined 33.33% over the past 60 days, while estimates for peers Curtiss-Wright Corp. and Leonardo DRS Inc. rose 0.86% and 2.36%, respectively.
The sell rating comes as Rocket Lab targets the first launch of its Neutron rocket for later in 2026, a program carrying risks around engine qualification, vehicle testing and launch infrastructure readiness. Any delays could postpone expected revenue contributions and extend investment requirements, the firm said. Neutron has already secured five launch contracts despite not yet flying, according to a Seeking Alpha analysis.
Acquisitions Boost Capabilities, but Execution Risks Linger
In May 2026, Rocket Lab completed its acquisition of Motiv Space Systems, rebranded as Rocket Lab Robotics, adding space robotics and motion control systems. The deal strengthens the company's ability to provide end-to-end solutions for planetary exploration missions and national security applications. However, integrating and scaling recently acquired businesses presents execution risks that may take time to fully realize expected benefits, Zacks noted.
The company's space systems business generated $136.7 million in first-quarter revenue, more than double the $63.7 million from launch services. Total revenue reached a record $200.3 million, up 63.5% year over year, while backlog exceeded $2.2 billion, more than doubling. The company derives a significant portion of its business from government and defense-related customers, making it vulnerable to changes in government budgets and procurement priorities.
Liquidity Provides Cushion, but Valuation Stretches
Rocket Lab maintains a current ratio of 4.48, well above the industry average of 2.36, indicating sufficient capital to cover short-term obligations. Peers Curtiss-Wright and Leonardo DRS reported ratios of 1.52 and 1.86, respectively.
The stock's premium valuation leaves limited room for error. The company remains exposed to supply-chain constraints and component availability risks across its launch and space systems businesses, which could affect manufacturing schedules and margin performance. A Seeking Alpha analysis projects a valuation range of $120 to $140 per share based on $1.1 billion to $1.2 billion in 2027 revenue and a 60 to 65 times enterprise value-to-sales multiple.
The 72% rally has priced in significant optimism around Neutron's potential before the rocket has flown. Investors will watch for the first launch target later in 2026 as the key event that could either validate or deflate the current valuation.
This article is for informational purposes only and does not constitute investment advice.
