Rocket Lab Has a New Launch Pad. Does It Matter?

Key Points

• Rocket Lab opened its third launch complex, LC-3, at Wallops Island, Virginia, on Aug. 28.

• The new pad will be base of operations for launching Rocket Lab's Neutron reusable rocket.

• Neutron has the potential to add $350 million in annual revenue for Rocket Lab.

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It's official: Rocket Lab's (NASDAQ: RKLB) third launch complex, LC-3, is open for business.

On Thursday, Aug. 28, a star-studded cast of characters ranging from Rocket Lab Chief Executive Officer Peter Beck to Virginia Spaceport Authority CEO Ted Mercer to Virginia Governor Glenn Youngkin collectively cut the ribbon opening up LC-3 on Wallops Island, Virginia, the designated home launch pad for Rocket Lab's new Neutron reusable rocket.

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Image source: Rocket Lab.

The opening lifts the Commonwealth of Virginia into the big leagues for government and commercial rocketry, alongside California with its Vandenberg Space Force Base and Florida with Cape Canaveral. As the governor pointed out in his speech to attendees at the opening, Virginia has devoted $60 million in subsidies to building out its Mid-Atlantic Regional Spaceport (MARS). Rocket Lab is only one of three companies that will be launching out of MARS.

But every time Rocket Lab does launch a Neutron rocket, it will generate upward of $50 million in revenue -- and Virginia will take a cut.

Rocket Lab and Neutron

LC-3's opening marks a turning point for Rocket Lab's business. Ever since Beck first announced that Rocket Lab would build Neutron as a medium-lift reusable space vehicle, the company's been burning cash and reporting losses, as it does the research and development work necessary to make Neutron a reality. Once Neutron begins launching, however, and generating cash instead of consuming it, the equation will "flip," Beck says.

When will that happen? Rocket Lab has been saying for some time that it plans its first Neutron launch in 2025 (without specifying exactly when in 2025 this will happen). At last month's LC-3 opening, however, Rocket Lab came the closest yet to naming a date.

Speaking with reporters after the ribbon cutting, Shaun D'Mello, vice president in charge of Neutron, confirmed that Neutron's "second stage is already on a boat on its way" to Wallops Island. Other rocket parts are also arriving by boat, and the goal is to have the full rocket on site by November, just in time to put it on the pad and launch.

Expressing confidence in that timeline, Youngkin quipped: "Before the end of this year, we will all gather and we will watch the first Neutron rocket lift off from Pad 0D right here together. If it's on Christmas Day, I'll bring the gifts."

Image source: Rocket Lab.

Gifts for all

Youngkin was addressing the crowd of stock analysts, reporters, state delegates, and other attendees at the LC-3 opening -- but investors can expect to receive a few gifts of their own if Neutron launches on time.

According to Beck, 2025's inaugural launch should evolve into three launches in 2026, five in 2027, and perhaps seven or more Neutron launches annually in later years. (All this on top of a continuing cadence of launches by Rocket Lab's smaller Electron rocket fleet, operating out of both Wallops LC-2 and LC-1 in New Zealand).

As time goes on, however, the Electron launches may recede in importance next to the much more lucrative Neutron launches. Late last year, strong demand for launch services enabled Rocket Lab to raise its price on Electron to $8.4 million per launch. But each Neutron launch is expected to dwarf even that larger figure, bringing in at least six times as much revenue per launch.

Assuming seven launches per year, that's an additional $350 million annually in Rocket Lab's pocket -- roughly triple the revenue that Electron launches produced for the company last year. (And Electron revenue alone was already up 74% from 2023.)

Is Rocket Lab stock a buy?

Will this be enough to turn Rocket Lab stock profitable? Analysts polled by S&P Global Market Intelligence think so. According to their calculations, Rocket Lab, which lost $0.38 per share last year, could earn as much as $0.33 in 2028, the first year Neutron hits a seven-launches-per-year cadence.

Of course, that still means that Rocket Lab stock costs nearly 140 times earnings that it won't actually be earning for another three years. To me, that seems a pretty aggressive valuation -- expensive enough that I personally won't be buying more Rocket Lab stock at these levels. But opinions can certainly differ.

If growth stocks are your bag, and you think valuation doesn't matter, fast-growing Rocket Lab stock might still look like a buy to you.

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Rich Smith has positions in Rocket Lab. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.