Rocket Lab's Plunge: Buy the Dip or Watch from the Sidelines?

Key Points

• Rocket Lab's stock surged over 360% in 2024 as it gained immense popularity among retail investors.
• The stock has tumbled 44% from its 52-week high in January, driven by a risk-off market sentiment and soft guidance. 
• Despite weak Q1 guidance and ongoing volatility, analysts like Citi maintain a Buy rating, seeing the pullback as a potential long-term buying opportunity.

Rocket Lab USA Inc. NASDAQ: RKLB has recently experienced a sharp drop from its 52-week highs, leaving current investors wondering whether this selloff presents a buying opportunity or signals more downside ahead. After a year of massive triple-digit gains, the stock's sudden reversal has sparked speculation about what comes next for this space industry contender.

Rocket Lab’s Meteoric Rise in 2024

Rocket Lab emerged as one of the most impressive performers in the aerospace and defense sector in 2024. The company gained immense popularity throughout the year, with its stock rocketing over 360% higher. As the space industry expanded and competition intensified, RKLB positioned itself as a legitimate challenger to giants like SpaceX.

The company achieved several milestones, including a record-breaking sixteen Electron rocket launches, a 60% increase from the prior year, and securing over $450 million in new contracts. All of this fueled a powerful rally, drawing the attention of both institutional and retail investors.

The Sudden Shift: Why Has RKLB Stock Plunged?

But as quickly as sentiment turned overwhelmingly positive, it reversed. As of Monday’s close, shares of RKLB have fallen 44% from their recent 52-week high in January. Given the volatility, this sharp selloff has many investors asking whether it’s time to buy the dip, lock in profits, or stay on the sidelines. To figure out the best move, it's crucial to unpack what's been driving this decline and examine the company’s latest earnings report.

Risk-Off Market Sentiment Pressures High-Growth Stocks

One of the most significant forces working against RKLB is the broader risk-off sentiment that has gripped the markets. Growing fears over tariffs, rising prices, and broader economic uncertainty have pressured high-growth, speculative stocks like Rocket Lab. As a company that’s still unprofitable, RKLB relies heavily on investor confidence, risk appetite, and flawless execution to sustain its lofty valuation.

Tariffs, for example, could disrupt supply chains and push costs higher, a tough blow for a company already reporting negative earnings, with Q4 2024 EPS coming in at negative $0.10, missing expectations of negative $0.09.

Neutron Rocket Delays Add to Investor Anxiety

This shifting market dynamic has been compounded by concerns over delays in Rocket Lab’s high-stakes Neutron rocket program. Initially set for a 2024 debut, the first launch has now been pushed back to the second half of 2025. Any additional delays could amplify the stock's downward pressure for investors, as missed timelines tend to rattle confidence in unprofitable companies banking on future breakthroughs.

Disappointing Q1 Guidance Fuels the Selloff

Rocket Lab’s recent earnings report didn’t do much to ease those concerns. The company announced a Q4 revenue of $132.39 million, a 59.3% year-over-year increase that narrowly beat analysts’ estimates of $130.57 million. But it was the guidance for Q1 2025 that stung.

Management expects revenue between $117 million and $123 million, well below Wall Street's forecast of $135.7 million. Adding to the disappointment, the company guided for an adjusted EBITDA loss of $33 million to $35 million, with a non-GAAP gross margin projected to land between 30% and 32%.

These soft numbers reinforced the broader risk-off narrative, accelerating the stock’s slide.

Is This a Buying Opportunity or a Warning Sign?

Yet, despite this, some analysts see the pullback as a chance to buy into Rocket Lab’s long-term story. Citi, for example, lowered its price target from $35 to $33 but kept a Buy rating. The firm acknowledged the Neutron rocket delay but noted that such setbacks are common in the space industry, viewing any near-term weakness as an “enhanced buying opportunity.”

Even with the recent volatility, Wall Street’s consensus remains cautiously optimistic. RKLB has a Moderate Buy rating and a consensus price target of $21.50, suggesting a potential upside of over 15% from its latest close.

Looking Ahead: A Long-Term Bet with Short-Term Risks

Ultimately, while the current market environment is challenging for unprofitable, high-growth companies like Rocket Lab, the long-term picture still holds promise. If the company can stay on track with its Neutron launch and keep building momentum in the space systems sector, this pullback might offer a compelling entry point for investors who believe in Rocket Lab’s future. At the same time, caution is key, given the stock’s sensitivity to market sentiment and the company’s lack of near-term profitability.