Should You Buy, Hold or Sell Rocket Lab Stock Ahead of Q1 Earnings?

Core Viewpoint - Rocket Lab USA, Inc. is expected to report its first-quarter 2025 results on May 8, 2025, with a projected revenue of $120.7 million, reflecting a 30.1% increase year-over-year, but a loss of 10 cents per share, indicating a deterioration from the previous year's loss of 9 cents [1][2]. Revenue Performance - The Launch Services Unit is anticipated to generate revenues of $35.6 million, an 8.9% increase from the previous year, driven by a higher number of launch missions and strong bookings [8][9]. - The Space Systems Unit is expected to report revenues of $85.5 million, representing a 42.4% growth year-over-year, supported by growth in spacecraft and satellite manufacturing [10]. Earnings Outlook - Despite strong revenue projections, higher operating expenses related to the Neutron program, increased headcount, and R&D costs may negatively impact operating margins and overall earnings [12]. - Rocket Lab has a history of earnings surprises, beating estimates in three of the last four quarters with an average surprise of 9.04% [2]. Stock Performance - Rocket Lab's stock has surged 466.2% over the past year, significantly outperforming the Zacks aerospace-defense industry, which rose by 6% [13]. - The company's forward price-to-sales ratio stands at 15.49X, indicating a premium compared to the industry average of 1.99X, suggesting investors are paying a higher price for expected sales growth [14]. Industry Context - The space economy is projected to reach $1.8 trillion by 2035, bolstering long-term growth prospects for space stocks like Rocket Lab [17]. - The Electron launch vehicle is noted as the second most frequently launched orbital rocket by U.S. companies, highlighting Rocket Lab's competitive position in the market [17]. Challenges - High operating expenses due to ongoing investments in product development are offsetting revenue growth, leading to quarterly losses [18]. - A recent report accused Rocket Lab of misleading investors about the Neutron rocket's development timeline, resulting in a securities class action lawsuit that may impact the company's performance [19]. - The company is currently burdened with high debt levels compared to peers, raising concerns for investors [20].