Rocket Lab Completes Defense Launch Ahead of Schedule Amid Persistent Overvaluation Risks

What happened

Rocket Lab successfully launched the STP-S30 mission for the U.S. Space Force's Space Systems Command, finishing five months early and highlighting operational efficiency in small-lift launches with its Electron rocket. This mission advances technologies for U.S. space superiority, reinforcing the company's role in defense contracts and its growing backlog. However, the DeepValue master report emphasizes that Rocket Lab remains deeply unprofitable, with negative earnings, cash burn, and a reliance on equity dilution for funding. Despite a ~137% stock gain over 12 months, the valuation at ~$28 billion and over 50x trailing sales reflects speculative optimism rather than proven unit economics or sustainable free cash flow. While timely execution on defense missions is positive, it does not address core risks like Neutron delays to mid-2026, competitive pressures, or the path to profitability.

Implication

Investors should view this launch as a minor positive that reinforces Electron's reliability and may strengthen defense relationships, yet it does not resolve the fundamental financial challenges outlined in the DeepValue report. The company's heavy cash burn and negative interest coverage necessitate further equity raises, likely diluting shareholders and increasing downside risk if growth expectations falter. With Neutron's first flight delayed and entering a competitive medium-lift market, the long-term growth story remains speculative and unproven. Valuation metrics like negative P/E and DCF suggest the stock is priced for perfection, leaving little margin of safety. Therefore, while operational successes are commendable, they do not justify the current price or alter the strong sell recommendation based on fundamentals.

Thesis delta

The successful launch does not materially shift the DeepValue report's strong sell thesis, as it is an incremental operational win that does not address profitability, valuation, or Neutron execution risks. It may slightly enhance near-term confidence in Electron's cadence and defense contract execution, but the overarching concerns about cash burn, dilution, and speculative pricing remain unchanged. No adjustment to the investment stance is warranted, as the core thesis of overvaluation and high risk persists.