Bank of America reaffirms Rocket Lab (RKLB.US) “buy” rating: short-term launch disturbances are noise, and the core of the valuation is based on Neutron's first flight in 2026

The Zhitong Finance App learned that although Rocket Lab (RKLB.US) performed slightly below Wall Street's expectations in some of its businesses, Bank of America continues to be optimistic about the company, reaffirming its “buy” rating and target price of $115.

Analyst Ronald Epstein also called the possible weakness in Rocket Lab's stock price after revenue falls short of expectations as “a particularly attractive time to buy,” citing strong growth in its Space Systems (Space Systems) business, a record high backlog of orders, and stronger third-quarter revenue prospects.

Launch business drags down Rocket Lab's revenue

Rocket Lab reported second-quarter revenue of US$234.1 million, up 62% from US$144.5 million in the same period last year. This result surpassed the Bank of America's estimate of US$228 million, but was slightly lower than the US$237 million consensus estimate quoted in the bank's report.

This gap is mainly related to Rocket Lab's “Launch Services” (Launch Services) division, which's revenue fell about 4% year over year to $44.6 million. According to the company's quarterly filings with the US Securities and Exchange Commission (SEC), the space systems business is trending in the opposite direction, with revenue soaring from $97.9 million in the same period last year to $189.5 million.

Bank of America said that, driven by the work related to the US Space Development Agency's Tranche II and III projects and Rocket Lab's spacecraft parts business, the revenue of the space systems business far exceeded its estimate of 165 million US dollars.

The bank also indicated that there are signs that the weakness in launch revenue may be temporary. Rocket Lab said that during the second quarter and after the end of the quarter, the company obtained more than US$437 million in new launch contracts on Electron, HASTE and Neutron rockets, making its launch backlog exceed 90 missions.

By the end of the quarter, Rocket Lab's total backlog of orders reached a record $2.36 billion, a sharp increase of 137% year over year, according to the company. According to its filing with the SEC, it is expected that approximately 45% of these backlog orders will be recognized as revenue within the next 12 months.

The Bank of America rounded this figure to about 46% in its report, giving the agency another reason to expect the company to continue growing revenue beyond the latest quarter.

The company also narrowed its GAAP net loss to $49.3 million from $66.4 million in the same period last year. According to Rocket Lab's filing with the SEC, gross profit increased from $46.4 million to $84.6 million.

Bank of America predicts more future growth for Rocket Lab

Rocket Lab expects third-quarter revenue to be between $250 million and $265 million. The Bank of America said that at the median value, this would represent a year-on-year increase of about 66%, which is higher than the consensus estimate of 237 million US dollars quoted by the agency.

The company also expects an adjusted EBITDA loss for the third quarter to be between $17 million and $23 million. Prior to that, the adjusted EBITDA loss for the second quarter was $8.8 million. Bank of America said this performance was better than its estimated loss of $19.3 million, and also better than the $22.1 million consensus loss forecast quoted in the report.

The Neutron rocket is another important part of its future outlook. Rocket Lab said production of the rocket's primary tank is still progressing as planned to ensure that the reusable medium launch vehicle is delivered to the launch pad in the fourth quarter of 2026, while the first flight hardware continues to be assembled, integrated and tested.

Bank of America pointed out that there is still uncertainty about the development schedule, making Neutron one of the biggest variables in the eyes of investors watching the company's next phase of growth.

The bank's target price of $115 is based on a discounted cash flow (DCF) analysis up to 2045, which includes benchmarks, optimism, and pessimistic scenarios. Bank of America believes that production delays, Neutron R&D delays, and difficulties in achieving expected acquisition synergies are downside risks facing its target price.

As it stands, the agency chose to ignore this quarter where launch business performance was weak. Bank of America continues to be optimistic about the upward potential of Rocket Lab shares after the announcement of earnings reports as the space systems business doubles revenue, sets a record backlog of orders, and is expected to usher in another quarter of rapid growth.