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Rocket Lab (Nasdaq: RKLB) is fast becoming one of the investing world’s favorite companies. The disruptor of the space economy not only operates in an intriguing space (literally), but its stock is also a 10-bagger during just the past 18 months.

Fun companies who provide excellent investment returns often turn out to be quite popular.

Long-time 7investing subscribers are already well-aware of our rich history with Rocket Lab. When the stock was selling for just $4 in early 2025, we publicly sung its praises and claimed it had 453% upside and was worth $22 per share. It’s a four-time official recommendation on our scorecard and has made already an appearance in our monthly Best Buys portfolios three times in 2025.

Yet with Rocket Lab’s stock now hovering at nearly $50 per share, what are investors to do? Is there more room for it to reach an even higher altitude? Or is it running out of fuel and bound to come crashing back down to Earth?

Now is the right time to once again check in on Rocket Lab’s valuation. And to do that, I recently fired up the ninth iteration of my Rocket Lab discounted cash flow valuation.

I’ll describe all of the details in the article below. But if you’re short on time and want me to jump right to the punchline, I think Rocket Lab’s stock is worth around $27 per share.

There’s a ton of context and nuance on how I came up with that number. Though that is the price at which I would confidently recommend that investors buy shares.

And as with any public-facing price targets issued in the investing world, the devil is in the details.

I’ve been following Rocket Lab’s stock ever since it came public in its SPAC IPO in August 2021.

Here’s an updated, objective valuation based upon what I believe is the most likely outcome for this end-to-end space company and its incredible future.

Introducing the Discounted Cash Flow Valuation

Let’s first briefly review the inner workings of a discounted cash flow analysis.

A DCF’s job is to estimate a company’s future free cash flows — i.e. the cash it generates after paying all of its costs of goods, operational expenses, and capital expenditures — and then discount those future free cash flows back to present day. The end result is a fair value, which represents a per-share equity value of that the company is objectively worth. After all, as investors we are the ultimate owners of this business and its future free cash flows.

DCF models are the primary way that Wall Street firms set price targets for stocks. You’ll often see price targets change on earnings day; where there is new information available that alters the inputs and then adjusts the price target that is predicted.

Yet a good DCF model isn’t simple to build. It should represent all of the company’s relevant publicly-available information, and then grind it through a methodical process to come up with an accurate final answer.

All valuation models ultimately represent a “story”. Each story has its own assumptions and its own version of how the future will look. The final chapter and the final price target is a reflection of all of those assumptions.

Rocket Lab’s valuation is a function of how many rockets it launches per year, how many large-dollar contracts it wins, its operating efficiency, and its strategic decisions related to acquisitions and capital allocation.

The specific inputs and assumptions I have used are purposely conservative. This is because Rocket Lab is fast-moving and has a very uncertain future. I want to ensure the final price target I issue represents a very reasonable set of expectations; but also that there is upside involved if the company were to exceed these expectations.

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Without further ado, let’s take a closer look at the details of my Rocket Lab DCF.

Revenues

Rocket Lab currently generates revenue through its Launch and Space Systems divisions. It has often alluded to a third, Space Applications, which I believe will go live in the year 2030.

• Launch involves launching a customer’s satellites into orbit. Rocket Lab is presently only launching its Electron rocket, but plans to commercially introduce a larger Neutron rocket later this year.
• Space Systems involves manufacturing satellites and their components for customers. When Rocket Lab wins a contract, it recognizes the total amount upfront as backlog and then the revenues later on as the work gets completed.
• Space Applications represents a potential future revenue stream, where a Rocket Lab-owned satellite constellation could provide operating activities to customers on a per-month or per-year contractual basis.

Last year, Rocket Lab recognized $436 million of revenue. Launch accounted for 29% of the total ($125 million) and Space Systems accounted for the other 71% ($311 million).

The company made a name for itself by “democratizing outer space” for customers of any size. Electron could carry payloads of up to 300 kgs and was available for anyone for a quite-reasonable sum of around $7 million. Small businesses wanting to set up shop in outer space no longer had to wait around to rideshare with SpaceX. They could finally book their own dedicated launches, which would place their satellites exactly where they wanted them to be.

Though Electron’s contribution to Rocket Lab’s mission is invaluable, its contribution to the top-line will diminish over time. Neutron is a much larger rocket that offers superior unit economics, while also charging 10x more per launch than Electron.

Rocket Lab is bidding on several very large contracts with America’s defense department. It’s actively hunting for bolt-on acquisitions that would make the bidding process easier for the government (i.e. working with fewer, larger vendors — who can more efficiently manage their overhead costs). We recently saw this with both Geost and Mynaric in 2025. I expect Rocket Lab will win contracts of increasing significance in the coming years, especially as its HASTE responsive program will open the door for larger deals such as America’s new Golden Dome initiative.

My total revenue expectation of $708 million in 2025 is less than the $749 million that Rocket Lab explicitly forecast it would recognized this year when it issued its initial SPAC IPO prospectus. However, my expectation of the company generating $1.87 billion of revenue in 2027 exceeds its guidance of $1.57 billion in the final year of its forecast window.

Overall, my 15 year window between 2025 – 2040 predicts there will be 500 Electron launches and 175 Neutron launches. Based on an average satellite weight of 100 kilograms, this would estimate that Rocket Lab places around 20,000 total satellites into orbit during the next decade and a half. I estimate this will account for around 20% market share, of more than 100,000 satellites placed by all launch providers during that time frame.

Here are the specific inputs and assumptions I have built into my model:

Electron

• Modest growth in Electron launches, from 16 in 2024 to 25 in 2026 and to 35 per year in 2028 and beyond. Smaller customers will still be interested in Electron, though the launch cadence eventually plateaus.
• Electron’s average price per launch was $7.84 million in 2024; i.e. $125 million in Launch Revenue divided by 16 launches. Due to HASTE carrying slightly larger payloads and the responsive program carrying a higher price, I expect its average price per launch to hit $9.7 million in 2028 and to rise at 3% annually in all years after that.
• Electron Revenue increases from $125 million in 2024 to $228 million in 2026 to $339 million in 2028. It then reaches $483 million in 2040.

Neutron

• Neutron will not have any test launches and I am not modeling for any failed missions.
• Neutron’s inaugural launch will take place in late 2025 and will be priced at $55 million.
• If its first launch is successful, Neutron will have three more launches in 2025 and then five more in 2026. Its launch cadence will gradually rise and eventually peak at 15 launches per year in 2037 and beyond.
• Revenue per Neutron launch will increase at 5% annually, from $55 million per launch in 2025 to $114 million per launch in 2040. By comparison, SpaceX’s Falcon 9 mid-lift rocket is currently charging $67 million to launch a similar payload capacity.
• Neutron Revenue increases from $55 million in 2025 to $173 million in 2026. It further increases to $772 million in 2030 and reaches $1.7 billion in 2040.

Space Systems

• Space Systems revenue comes from winning large contracts, primarily for the missions of America’s defense agencies. Total contract value is recognized initially as backlog, and revenue is then recognized as the work is completed.
• There are several large programs on the near-term horizon, including the Space Defense Agency’s Tranche 2, NASA’s Aspera Galaxy mission, and the Department of Defense’s Golden Dome initiative.
• I expect Rocket Lab will win an addition $750 million contract from future SDA Tranches, $600 million from the Space Force’s NSSL Phase 3 program, and a $1 billion contract from the Golden Dome. All of these will be won within the next calendar year.
• Based upon the above, I expect Rocket Lab’s Space Systems backlog will quintuple within one year. I am modeling for it to increase from $590 million today (in Q2 2025) to $3.3 billion by the end of fiscal 2025.
• The backlog represents the total contract value and will take an average of three years to work through. I have divided each contract’s value into equal increments and recognize the revenues over a three-year period.
• A portion of all backlog include the final launch, which is recognized as Launch Revenue instead of Space Systems Revenue.
• Space Systems Revenue increases from $311 million in 2024 to $476 million in 2025 and to $806 million in 2026. It hits $4 billion in 2032 and eventually surpasses $11 billion in 2040.
• Space Systems is one of the most important divisions of Rocket Lab’s future. It will account for 2/3 of total revenue by the year 2040.

Space Applications

• Rocket Lab has often mentioned an interest in introducing a “low-cost, high volume Rocket Lab constellation spacecraft.”
• This would be a satellite constellation owned by Rocket Lab that leases out operations to tenants on a per-month basis. It is similar to cloud computing, where Amazon Web Services owns the data center infrastructure and rents out the computing and storage capacity.
• I estimate the Rocket Lab’s flatellite constellation will first be deployed in 2030 and will generate its first $100 million of customer revenue in 2031.
• Rocket Lab will methodically invest in $100 million deployments, which are tied to future customer commitments. Each deployment will generate $70 million of incremental gross profit in the following year, providing a 70% cash-on-cash return in its first operating year.
• Rinse and repeat. Space Applications Revenue will surpass $1 billion in mid 2035 and will eventually reach $3.2 billion in 2040.

Costs of Goods Sold and Operating Expenses

Costs of Goods Sold

Rocket Lab’s largest costs right now are its costs of goods sold — i.e. the bill of materials for the rockets it is launching and the satellites it is manufacturing.

Those will continue to be significant throughout its lifecycle. Yet thanks to Neutron having reusable components and operational efficiencies that manifest as it gets larger, Rocket Lab will benefit from economies of scale that will bring down the future launch costs of its rockets.

Electron’s 16 missions in 2024 recognized a total cost of goods sold of $91 million, equating to an average $5.67 million cost per launch. I am modeling for Electron’s cost per launch to decline/improve by 2% annually and to reach $5.11 million per launch by 2030. It will then decline/improve by 1% annually and reach $4.6 million per launch by 2040.

Along with the 3% pricing escalator, I estimate each Electron launch will generate $13.8 million in revenue and cost only $4.6 million by the year 2040. Electron launches will provide a 66% gross margin that is recognized in the Launch division.

Neutron’s costs per launch will decline more quickly, as efficiencies will be recognized most quickly in its first few years of operations. I am modeling for Neutron’s cost per launch to decline by 5% annually during the next five years, from $25 million per launch in 2025 to $20.4 million per launch in 2029. It will then further decline 2% annually through 2034 and 1% annually through 2040.

Along with its 5% pricing escalator, I estimate each Neutron launch will generate $114 million in revenue and cost only $17 million by the year 2040. Neutron launches will provide a 85% gross margin that is recognized in the Launch division.

Operating Expenses

Operating costs represent the overhead expenses tied to running the business and its future growth. In addition to employee salaries and keeping the lights on at its facilities, Rocket Lab also invests heavily in research in development to incrementally improve the performance of its rockets.

CFO Adam Spice has earned a lot of credibility with investors in recent years by issuing cost forecasts that turn out to be conservative. As one example, he stated during the company’s 2021 IPO that he expected to spend $300 million annually on the combination of R&D and capital expenditures through the year 2024, which would be used to get Neutron to the launch pad.

Even though Neutron is taking a bit longer for its inaugural launch, the expense budget has come in below that initial forecast:

• In 2022: R&D expenses were $65 million and capital expenditures were $42 million
• In 2023: R&D expenses were $119 million and capital expenditures were $55 million
• In 2024: R&D expenses were $174 million and capital expenditures were $67 million.

Rocket Lab benefits from operating in a space deemed to be of strategic national interest, and it was recently awarded $24 million of funding from America’s CHIPS Act that will be used for its supply chain.

The company’s headcount is the primary driver of its operating expenses: it ramps up hiring to support growth on its near-term horizon. Headcount has increased from 1,363 employees in 2022 to 2,428 today. I expect its full time employee count to continue to grow aggressively, exceeding 10,000 in 2034 and ultimately reaching 18,514 by the year 2040.

Even though salaries will increase alongside inflation, Rocket Lab will counteract this by getting more efficient. Its overall operating expense per employee — which is the combination of salaries, stock awards, and all other overhead costs — will decline from around $141,000 per employee in 2024 to $107,000 in 2040.

R&D expenses accounted for 40% of revenue in 2024, largely due to the hard work being put into Neutron’s development. I project R&D expenses will represent only 8% of revenue by 2040.

Sales, General and Administrative expenses (SG&A) are mostly fixed in nature. I am modeling that SG&A will decline from 30% of revenue in 2024 to just 4% by 2040.

Rocket Lab reported a GAAP operating loss of ($190) million in 2024. I expect the company will break even in fiscal 2026 and will gradually increase its annual operating profit to $1 billion by 2030 and will eventually reach $6.3 billion by 2040.

Capital Expenditures and Capital Allocation

Launching rockets and satellites into space is a capital intensive process. I expect Rocket Lab to continue to invest significant capital expenditures (CapEx) into its manufacturing and launch facilities.

Electron has two dedicated launch sites — one in New Zealand and one in Virginia — and a third is underway to launch Neutron also off the coast of Virginia. Rocket Lab’s has R&D centers in New Zealand, California, and Alabama. It also acquired Virgin Orbit’s headquarters and manufacturing center in California after the company went bankrupt.

I project its capital investments to ramp up quickly, in order to support getting Neutron to the launch pad and then to win lucrative new contracts. I am modeling for Rocket Lab’s annual CapEx spend to sextuple within the next five years — from $67 million in 2024 to $428 million in fiscal 2030. After that, I actually think it will slow down a bit — as the capital budget will transition from future growth (the “ramp up phase”) to the maintenance and replacement of existing equipment (the “operations phase”). I am modeling for depreciation as a percentage of total CapEx to gradually increase from around 50% today to 95% in 2040.

In addition to its core capital budget, I also expect Rocket Lab will invest to build and then launch its own satellite constellation. This will initially cost $105 million of CapEx in 2030 and will gradually rise to $520 million in 2040.

I am modeling for Rocket Lab’s total annual CapEx budget to eventually reach $1.1 billion by 2040, which represents 7% of total revenue in that year.

Stock-based compensation is offered to all full-time employees and has historically resulted in around 15 million new shares being issued every year. I am holding that number constant and am also modeling for SBC to represent 13% of revenue in all years of the DCF forecast window. These assumptions would predict that Rocket Lab’s stock price rises to at least $171 per share by the year 2040.

The company is carrying $355 million of convertible debt on its balance sheet. I think it is likely that will fully-convert into 62 million new shares of equity being issued in 2030.

Rocket Lab’s acquisitions of Mynaric and Geost this year cost $75 million and $325 million, respectively. I’m modeling for them to spend another $400 million on acquisitions in 2027 and then again in 2028 — to support its future growth as it goes hunting for larger contracts.

Long-Term Debt and the Cost of Capital

Rocket Lab has nearly $700 million of cash and short term investments, which is an incredibly strong financial foundation. That’s largely thanks to it raising $777 million during its SPAC IPO at a generous $4.8 billion valuation in the summer of 2021.

Elsewhere on the balance sheet, the company has $72 million of debt outstanding from Trinity Capital that is costing 2.2% per year and another $355 million of convertible debt that is costing 4.25%. As mentioned above, I expect its convertible debt to convert into 62 million shares of new equity in 2030 (which also includes the impact of the capped call option it purchased, which reduces the dilution by around 10%). Rocket Lab also raised $387 million through an at-the-money shelf offering earlier this year, which increased its share count by around 700,000.

Rocket Lab today has 525 million shares outstanding. Between its stock-based compensation and the convertible debt, I believe its outstanding share count will reach 816 million by 2040. I am not modeling for it to use any of its future cash flows to buy back shares or to reduce its share count.

Due to the significant volatility of its stock price, I am increasing its weighted average cost of capital quite significantly this time around. I used a weighted average cost of capital of 9.44% in my previous article from March 2024, but am now increasing the WACC to 12.1% — which is based upon a 12.1% cost of equity and a 7% cost of debt.

Recap of Key Assumptions

To recap what I’ve mentioned above, here are the key assumptions of this ninth iteration of my DCF model:

• $8.9 million average revenue per Electron launch and $55 million average revenue per Neutron launch in 2025. (That’s up from my previous assumption of $8.1 million and $50 million respectively.)
• Cost per launch declines to $4.6 million for Electron and to $17 million for Neutron by 2040. (Compared to my previous assumption of $6 million for Electron and $25 million for Neutron.)
• Total backlog quintuples from $1 billion today to $5 billion by the end of 2025. (Up significantly from my previous assumption of $1 billion in backlog in 2025.)
• Reaches profitability in both earnings and cash flows by 2027. (Same as before.)
• No additional issuance of debt is necessary. Convertible offering results in 62 million new shares in 2030. (I previously assumed 29.6 million new shares in 2029.)
• Annual capital expenditures gradually rise from $106 million in 2025 to $1.1 billion in 2040. (Up significantly from my previous assumption of $150 million per year at steady state.)
• $400 million on acquisition in both 2027 and in 2028 (Compared to a previous assumption of no acquisitions.)
• 3% terminal growth rate in all years beyond 2040. (Same as before.)

Price Target and Final Thoughts

So now let’s circle back to that punchline. I estimate Rocket Lab’s present equity value is worth $27.48 per share. That represents the fair value of what Rocket Lab’s shares are worth today. And it’s 23% higher than my estimate of $22.35 per share in March 2024.

The stock market represents a gigantic global auction, and it won’t necessarily agree with my fundamental-based valuation. When the stock was trading at $4 per share, it appeared to be egregiously undervalued. Yet with the stock today trading at $50 per share, I would argue that it is now considerably overvalued.

The price target I calculated with this DCF isn’t intended to talk any investors into selling your Rocket Lab shares. Even if the stock currently looks expensive, great companies with shareholder-friendly leadership teams will find ways to outperform expectations and to unlock incremental equity value. As the legendary value investor Ben Graham famously phrased it: “In the short-term, the stock market is a voting machine. But in the long-term, it’s a weighing machine.”

I continue to hold an active position in Rocket Lab. And I couldn’t be more excited to see what its future holds.