A Critical Juncture for Rocket Lab: Analysts Sound Alarm Amid Institutional Confidence

Rocket Lab USA US7731221062

Rocket Lab USA shares have delivered a staggering performance over the last year, soaring more than 250% in value. This remarkable rally, however, has placed the company squarely in the crosshairs of skeptical market analysts. A stark divergence of opinion is emerging, with research firms issuing sell warnings even as major institutional investors continue to build their positions.

The confidence from large investors is not without foundation. Rocket Lab's operational achievements and contract wins provide a compelling narrative. The company completed a record 21 successful Electron missions in 2025, demonstrating consistent execution.

Furthermore, its backlog has swelled beyond the $2 billion mark, anchored by a substantial $816 million contract secured with the Space Development Agency in 2025. Market speculation is rife regarding a potential follow-on award from the U.S. Space Force, rumored to be worth approximately $1 billion, adding further fuel to investor optimism.

This institutional faith is evidenced by recent activity. In the third quarter of 2025, Sumitomo Mitsui DS Asset Management established a new position, acquiring nearly 48,000 shares valued at $2.29 million. Overall, institutional holders now control over 71% of the company's outstanding shares.

Valuation Concerns Take Center Stage

Despite this bullish activity, a detailed analysis from Seeking Alpha has downgraded Rocket Lab to a "Sell" rating. The core argument is that excitement surrounding the future Neutron rocket has propelled the equity to unsustainable valuations, decoupling it from underlying fundamentals.

Trading at $86.58 per share, the company commands a market capitalization of $46.25 billion. This figure represents a multiple of 48 times its expected sales—a ratio that gives many analysts pause. Based on EV/EBITDA metrics, researchers calculate a potential downside risk of 20% to 38%.

The consensus on Wall Street appears to align with this cautious view. The average price target among analysts sits at $71.38, significantly below the current trading level.

The Neutron Delay: A Costly Setback

Compounding these valuation fears is a critical development delay. The inaugural launch of the Neutron rocket, initially scheduled for 2024, has now been pushed to 2026. This postponement is not merely a timeline issue; it carries a direct financial impact, generating approximately $15 million in additional costs per quarter. These expenses strain the company's already tight cash flow situation.

The Neutron remains central to Rocket Lab's long-term strategy, designed to challenge established systems with a payload capacity of 13,000 kilograms, though it still trails SpaceX's Falcon 9 (17,500 kg).

2026: The Make-or-Break Year

The upcoming period is widely viewed as a decisive test. Market expectations are set for Rocket Lab to achieve its first positive EBITDA and positive operating cash flow—milestones critically dependent on the successful deployment of the Neutron.

All eyes will be on the fourth-quarter 2025 results, scheduled for release on March 3, 2026. Investors will scrutinize whether management can contain the cost overruns from the Neutron delays and if revenue growth from defense contracts can ultimately justify the company's ambitious valuation. The coming year will serve as the ultimate litmus test for the current investment thesis.