Bank of America reiterates Rocket Lab (RKLB.US) "Buy" rating: Short-term launch disruptions are noise; the core valuation focuses on the 2026 Neutron maiden flight.

Despite Rocket Lab (RKLB.US) having some business performance slightly below Wall Street's expectations, Bank of America Corp continues to have a positive outlook on the company, reiterating its "buy" rating and a target price of $115. Analyst Ronald Epstein described the potential weakness in Rocket Lab's stock price following revenue missing expectations as "a particularly attractive buying opportunity," citing strong growth in its Space Systems business, record-high backlog, and a stronger revenue outlook for the third quarter. Launch business drags down Rocket Labs revenue Rocket Lab reported second-quarter revenue of $234.1 million, a 62% increase from $144.5 million in the same period last year. This result surpassed Bank of Americas estimate of $228 million but was slightly below the consensus expectation of $237 million cited in the bank's report. This shortfall is mainly related to Rocket Lab's Launch Services segment, whose revenue declined approximately 4% year-over-year to $44.6 million. In contrast, according to the companys quarterly filing with the U.S. Securities and Exchange Commission (SEC), the performance of its Space Systems business was the opposite, with revenue soaring from $97.9 million in the same period last year to $189.5 million. Bank of America stated that the revenue from the Space Systems business exceeded its estimated $165 million, driven by work related to the U.S. Space Development Agencys Tranche II and III projects, as well as Rocket Labs spacecraft parts business. The bank also noted signs indicating that the weakness in launch revenue may be temporary. Rocket Lab stated that during the second quarter and after the quarter's end, the company secured over $437 million in new launch contracts for the Electron, HASTE, and Neutron rockets, pushing its launch backlog to over 90 missions. According to the company, as of the end of this quarter, Rocket Lab's total backlog reached a record $2.36 billion, a 137% year-over-year surge. Its filing with the SEC indicated that approximately 45% of this backlog is expected to be recognized as revenue in the next 12 months. Bank of America rounded this figure to about 46% in its report, providing the institution another reason to anticipate continued revenue growth for the company following the latest quarter. The company also narrowed its Generally Accepted Accounting Principles (GAAP) net loss from $66.4 million in the same period last year to $49.3 million. According to Rocket Labs filing with the SEC, gross profit increased from $46.4 million to $84.6 million. Bank of America Corp predicts more growth for Rocket Lab Rocket Lab expects third-quarter revenue to be between $250 million and $265 million. Bank of America stated that this would represent about a 66% year-over-year growth based on the median, exceeding the $237 million consensus estimate cited by the institution. The company also anticipates that adjusted EBITDA losses for the third quarter will be between $17 million and $23 million. Previously, the adjusted EBITDA loss for the second quarter was $8.8 million, with Bank of America stating this performance was better than its estimated loss of $19.3 million and also outperformed the consensus loss expectation of $22.1 million noted in the report. The Neutron rocket is another important component of its future outlook. Rocket Lab indicated that production of the first stage tank for this rocket is still progressing on schedule to ensure that this reusable medium-lift launch vehicle is delivered to the launch pad by the fourth quarter of 2026, while the assembly, integration, and testing of the first flight hardware continues. Bank of America pointed out that the development timetable remains uncertain, making Neutron one of the biggest variables for investors observing the next phase of the company's growth. The bank's target price of $115 is based on a discounted cash flow (DCF) analysis through 2045, which includes baseline, optimistic, and pessimistic scenarios. Bank of America believes that production delays, challenges in Neutron development, and difficulties in achieving expected acquisition synergies pose downside risks to its target price. For now, the institution chooses to overlook this weaker quarter in launch business performance. With revenue from the Space Systems business doubling, record-high backlog, and an anticipated fast-growing quarter ahead, Bank of America remains optimistic about the upside potential of Rocket Lab stock following the earnings report.