SpaceX has been an incredible investment, going from zero to a valuation of $350 billion in around two decades. That is, for those able to buy an ownership stake in the company. The private space flight giant has famously stayed private since its founding in 2002, even as it grows to previously unheard-of heights. Patience has turned to frustration for those waiting on the sidelines.

What if I told you there was an opportunity to buy a company similar to SpaceX at a much smaller market cap? That stock is Rocket Lab (RKLB 2.16%), a publicly traded rocket and space company nipping at SpaceX’s heels. If you have been waiting for years to buy SpaceX, Rocket Lab may be a perfect stock for you. Here’s why.

Successfully competing with SpaceX

With revenue reportedly over $10 billion in 2024, SpaceX has dominated the private rocket launch market for years with minimal competition. Now, Rocket Lab looks to be the second successful player in this sector.

With its small rocket called Electron, Rocket Lab has been able to win contracts from customers that don’t need the large payloads available on SpaceX. Rocket Lab offers precision where SpaceX offers bulk. The Electron rocket performed 16 successful missions in 2024, making it the only other company besides SpaceX to perform commercial missions on a regular basis.

On top of selling launch services, Rocket Lab will build and develop Space Systems for customers. These include items like solar energy tiles, space capsules, and other structures. Combined, the company has put together some remarkable growth in the last few years, bringing revenue from under $100 million at its IPO in 2021 to $436 million in 2024.

Profitability is still a concern. Rocket Lab posted an operating loss of $190 million in 2024. This is something to keep on eye on, but isn’t the end of the world, given how much Rocket Lab is pushing for expansion and seeing fantastic revenue growth. There is a huge opportunity for the company to go after, with the space economy worth hundreds of billions of dollars in spending every year.

Neutron rocket and vertical integration

So what is Rocket Lab burning all this money for? Because it wants to eventually directly compete with SpaceX in larger payload rocket launches. The most important product in development is the Neutron system, which promises to greatly increase payload capacity versus the Electron. According to reporting, this rocket will cost $50 million per launch, meaning a significant revenue opportunity for Rocket Lab if it can consistently launch just a few times a year (or more).

Neutron is slated for a test flight in 2025. However, some investment analysts believe the timeline is to be delayed and are bearish on the stock because of it. It won’t be the end of the world if Neutron has a setback, but the rocket needs to get up and running within a few years at the most. Otherwise, Rocket Lab will likely see huge losses and need to raise funds through debt or stock offerings.

The other segment with a lot of potential is what Rocket Lab calls Space Applications. This segment is still in its development stages, but from what we know publicly, the company is aiming to build its own constellation of satellites and sell software and services to third parties.

For example, instead of a company paying Rocket Lab to launch its own satellite into space, Rocket Lab will do everything itself and simply sell these capabilities to that same customer — a valuable proposition and another way for Rocket Lab to grow its presence in the space economy. However, this segment is highly speculative and will not be meaningful to the company’s financials for years.

RKLB Revenue (TTM) data by YCharts

The best way to play Rocket Lab stock

Rocket Lab stock is a double-edged sword. On one side, you have a fantastic track record of reliably launching rockets and rapid revenue growth. On the other, we have a large cash burn and uncertainty within the Neutron and Space Applications division.

The best way for an investor to buy Rocket Lab is to dollar-cost average (DCA) into the stock over time. That way, you can keep adding to the position if the company continues to execute on its growth trajectory. If the wheels start falling off, you can sell without putting a huge portion of your portfolio into this high-risk stock.

Today, Rocket Lab trades at a market capitalization of $9.5 billion, give or take. That is a price-to-sales ratio (P/S) of 21 for a business with low gross margins. What this means is Rocket Lab has a premium multiple versus its current financials, and that investors are expecting a ton of growth going forward. Don’t be afraid to buy the stock, but understand that this is a high-risk company to own in your portfolio today.