THE WATCHLIST

Welcome back. If you’re reading this, it’s because you’re serious about building lasting wealth—not chasing meme stocks. I’ll admit, I went down the quick cash road at one point, and it taught me the hard way that hype isn’t the path to wealth. My journey shifted once I committed to patience, discipline, and spotting great businesses early. Over the years, I’ve built conviction by finding strong companies, tuning out the noise and letting them compound into outsized returns.

I’ve compounded with Microsoft for nearly two decades (20% CAGR), bought Nvidia at $4, Tesla at $10, and Shopify at $3.70, among others. The formula is clear and simple: ignore everyone, buy great businesses, and let time do the work. That same mindset drives every pick I share here.

Let’s dive into Rocket Lab…(don’t forget the poll at the end)

Who is Rocket Lab and What Do They Do?

Rocket Lab (RKLB) is one of those companies quietly building the future of space. They started with Electron, a small rocket built for launching small satellites, and now they’re working on Neutron, a reusable medium-lift rocket. This means it’s designed to carry a moderate amount of payload (not as big as SpaceX’s Falcon, but more than small launchers) into space, and then return safely to be used again, reducing costs and turnaround time. It's aimed at competing in the growing commercial launch market.

But they’re not just a launch company anymore. RKLB has also expanded into space systems, which means they now design, build, and operate the actual hardware that goes into space, like satellites and the tech inside them. That means they don’t just get stuff into orbit, they help it operate up there, too.

Think of them as a vertically integrated space company, which is aa fancy way of saying they control nearly every part of the process themselves, from building rockets and satellites to launching and managing them. This makes them more efficient and reduces reliance on outside suppliers.

The company operates across three main areas:

• Launch Services: Includes Electron small-satellite launches (ideal for frequent, flexible missions) and Neutron, which is still in development and will handle bigger payloads.

• Space Systems: Covers the physical parts of a satellite, like satellite buses (the structure and power systems of a satellite), solar power systems (which provide energy), separation systems (which help deploy payloads in space), and other satellite components.

• Space Applications: Focuses on what happens after launch, such as mission operations (monitoring and controlling spacecraft), spacecraft management, and end-to-end satellite solutions, meaning they can handle everything from building to launching to operating a satellite for clients.

💰️ How RKLB Makes Money?

• Launch Services (50%+ of revenue): Paid per launch by commercial satellite operators, defense contractors, and government agencies. Revenue comes from dedicated and rideshare missions.

• Space Systems (40%): Sales of satellite hardware (solar panels, separation systems, reaction wheels, radios) and building/operating entire spacecraft for customers.

• Space Applications / Mission Services (smaller but growing share): Long-term revenue from operating satellites, data services, and end-to-end space mission contracts.

This diversified model positions RKLB beyond just a “launch company.” By integrating hardware, launch, and operations, they can capture more value across the entire satellite lifecycle, similar to how SpaceX leverages both Falcon and Starlink.

Durable Moat 

1. Yes, but narrow today: RKLB’s Electron is one of the only reliable small-satellite launch vehicles flying consistently. Combined with their vertical integration into spacecraft components and mission services, this gives them a differentiated position.

2. Sticky contracts: NASA, DoD, and NRO contracts are hard to win but sticky once secured, creating switching costs for government customers.

3. Not wide (yet): SpaceX dominates with Falcon 9 reusability and scale, limiting RKLB’s pricing power.

4. Future moat potential: Success of Neutron (reusable mid-lift rocket) could expand their moat and move them closer to competing with larger players.

Core Analysis

Market Position: RKLB is a leader in the dedicated small-satellite launch market with Electron, but not in overall orbital launches where SpaceX dominates. Their move into Neutron could expand their share into the mid-lift segment.

Market Opportunity (TAM/SAM/SOM): RKLB’s total addressable market is massive, often pegged in the hundreds of billions if you include launches, satellite systems, and in-space services. Some analysts even throw out numbers north of $300B.

The truth is, just because the market is that big doesn’t mean RKLB will capture most of it. SpaceX dominates the field, and the barriers to taking meaningful share are huge. When you zoom in on what RKLB can realistically serve (its SAM) and then narrow down to what it could actually capture (its SOM), the opportunity shrinks.

The TAM makes for great headlines, but the real question is how much of that smaller SAM and SOM the company can carve out.

Revenue Growth: YOY revenue growth has been consistently strong the last three years:

2022 > 2023 = 15.9%
2023 > 2024 = 78.3% (2024 - $436m revenue)
2024 > 2025 Projected 30-35% ($583m projected revenue)

Cash Flow: RKLB free cash flow is currently negative. The company continues to burn cash due to ongoing net losses and heavy investments in R&D and capital projects (for example, developing the Neutron rocket and expanding production facilities). It has financed this cash burn with fresh capital (such as a recent convertible debt raise and share offerings), giving a sufficient cash buffer on the balance sheet while it works toward future positive cash flow.

• Annual FCF in 2023 was -$150 million

• Annual FCF in 2024 was -$116 million

• Free cash flow positive by late 2026 if Neutron launches on schedule. Otherwise, expect them to be FCF positive sometime by FY 2027 or after

EPS Growth: RKLB continues to run negative earnings

2023 = −$0.38
2024 = −$0.37
2025 projected = −$0.45

Gross Margins: Growing but still far from margins seen in maturity or dominance in many tech/hardware sectors.

2022 = 9%
2023 = 21.02%
2024 = 26.63%

Pricing Power: RKLB’s margins are moving in the right direction, which tells me they’re getting more efficient and showing a little pricing power. In the small-launch niche, their reliability and limited competition let them keep healthy pricing on Electron missions and spacecraft contracts without giving deep discounts. Bigger players still set the tone on overall launch costs, but RKLB’s vertical integration and strong niche position have given them room to inch margins higher, showing they can command better pricing as they scale.

Debt & Cash: $490m long-term debt with about $570m in cash (as of mid Sept)

Institutional Ownership: Looking good at around 65-72%

Why RKLB Looks Good 📈📈📈

• Proven reliability with Electron, one of the most frequently launched small rockets globally

• Expanding into Neutron (medium-lift, reusable), which could unlock a much larger TAM

• Diversified model: launch, satellite systems, and mission services create multiple revenue streams

• Improving gross margins (from 9% in 2022 to 27% in 2024).

• Sticky government and defense contracts add predictable demand

• Strong institutional backing (72% ownership), shows confidence from the smart money

Why RKLB Can Be Concerning 📉📉📉

• Still unprofitable with negative EPS and free cash flow

• Heavy R&D and CapEx burn, especially tied to Neutron development

• Dependent on hitting Neutron milestones; delays could push back profitability

• Competitive pressure from SpaceX and other launch providers keeps pricing power limited

• Cash burn may require further dilution or debt raises

• Market leadership is niche (small-satellite launches) rather than the broader launch market

Scenario Analysis

• Base Case: RKLB keeps growing its launch cadence, Neutron progresses on schedule, and contracts keep flowing in. Stock grinds higher over time but nothing crazy.

• Bull Case: Neutron is a success, they land big government/defense deals, margins expand, and sentiment shifts. That’s when you could see a major rerating and real upside.

• Bear Case: Neutron slips, costs run high, or they keep raising capital and diluting shareholders. In that world, the stock takes a big hit.

Zoom Out

When you zoom out, RKLB is really a bet on the future of space commercialization. On one hand, you’ve got a massive tailwind: satellite demand is exploding, governments are spending more on defense and space, and private companies are lining up to get to orbit.

But RKLB doesn’t move like a traditional industrial stock. It trades more like a speculative growth name. It’s volatile, it reacts sharply to sentiment, and recent dilution plus insider selling show how much the company still relies on raising capital. That’s because they still need to prove themselves and build a path to profitability and show that can be FCF positive.

The good news? They’re building a sticky backlog of contracts, have strong government relationships, and if Neutron delivers, RKLB can move from a niche small-sat launcher to a legitimate mid-tier player.

My takeaway: this isn’t about today’s numbers, it’s about long-term execution. If they hit their milestones and manage cash wisely, RKLB benefits directly from one of the biggest long-term tailwinds out there. If not, dilution and setbacks will punish shareholders.

5 to 10 Year Outlook

Over the next decade, RKLB is going to look like a classic high-risk, high-reward bet on the commercialization of space. If they can pull off Neutron, their reusable medium-lift rocket, they could break out of the small-satellite niche and scale into multi-billion-dollar territory.

They’ve also been steadily building out their space systems business, which means they’re not just launching things into orbit, they’re building the hardware and running the missions too. That positions them as a vertically integrated player in a market that’s starting to reward that kind of end-to-end capability.

This isn’t a free ride, though. SpaceX and a growing crowd of new entrants are going to keep pressure on both pricing and margins, so execution and a competitive advantage matters here.

Bottom line: this is a speculative bet with real upside potential. RKLB could become a profitable mid-tier space powerhouse by 2030 or just stay a niche player if they can’t execute.

Summary

We’re looking at an emerging space company that’s carved out a real niche in small-satellite launches and is building momentum in spacecraft systems. Now they’re aiming to scale into the medium-lift market with Neutron, their upcoming reusable rocket.

Revenue growth has been solid, margins are heading in the right direction, and those sticky government contracts add some weight to the story. But they’re still unprofitable, burning cash, and heavily reliant on Neutron to hit the next stage of growth. Institutional ownership is strong, which signals some real confidence from the “smart money”.

Ultimately, it’s all going to come down to execution. RKLB could turn into a profitable mid-tier space leader or stay stuck in the niche if they miss.