Why Rocket Lab Stock Fell in February

Rocket Lab USA's (NASDAQ: RKLB) quarterly financials matched Wall Street expectations, but the company's guidance failed to quell the worries surrounding the stock.

Investors were disappointed, and the sell-off intensified as the month dragged on and the markets became increasingly risk adverse. Shares of Rocket Lab finished February down 29.5% for the month, according to data provided by S&P Global Market Intelligence.

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An uncertain timetable

Rocket Lab is a space stock focused on designing, manufacturing, and launching satellites for customers. The company lost $0.10 per share in the fourth quarter, in line with estimates, on revenue that was up 120% year over year to $132.4 million.

But the guidance for the current quarter underwhelmed. Rocket Lab sees Q1 revenue of between $117 million and $123 million, short of the $135.7 million consensus estimate.

The earnings report came barely a week after the release of a short report that questioned the timetable for Rocket Lab's next-generation Neutron rocket. Rocket Lab had been targeting a mid-2025 first launch for Neutron, but analysts at Bleecker Street Capital warned the first launch wouldn't happen for "a long, long time."

Investors are very excited about the Neutron's potential to help Rocket Lab gain market share in the launch business, helping to drive the stock up nearly 500% in late 2024. If Bleecker is correct that the Neutron is unlikely to take off until mid-2026 at the earliest, it would have a profound impact on the company's results for quarters to come.

Rocket Lab said the first launch is now slated for the second half of 2025, which is better than Bleecker Street's worst-case scenario but still represents a delay.

Is Rocket Lab stock a buy?

This is literally rocket science, and investors would be hard pressed to find a space program that hasn't experienced some delays. Investors need to understand that there is risk inherit with any of these space companies, and delays are commonplace. Further setbacks to Neutron are possible.

That said, Rocket Lab has a solid track record of successful development. Assuming the Neutron does make it to market, there should be ample chances for Rocket Lab to gain market share. There is ample reason for current investors to ride out this volatility. The quarterly guidance could continue to add to that volatility, because until Rocket Lab grows, issues like weather delays or the timing of launches can cause material fluctuations in quarterly results.

For those interested in buying in, patience will be required. Even after Rocket Lab's February decline, the stock is still up more than 200% over the past six months. There is still a lot of excitement priced into these shares and an uncertain timetable for when that patience will be rewarded with an uptick of new business.

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Lou Whiteman has positions in Rocket Lab USA. The Motley Fool recommends Rocket Lab USA. The Motley Fool has a disclosure policy.