Rocket Lab's FY23 Launch Revenue May Be Hampered By $22.5M Following Recent Satellite Mission Mishap: Analyst Cautions

Stifel analyst Erik Rasmussen reiterated the Buy rating on Rocket Lab USA, Inc. RKLB, lowering the price target to $10 from $11.

After the market close, Rocket Lab reduced its Q3 FY23 financial outlook following its 41st mission launch issue last week.

RKLB lowered the Q3 outlook for revenue to $66 million-$68 million (vs. $73 million-$77 million earlier) against the consensus of $74.5 million.

The analyst notes that the company's 3Q revenue is only impacted by one less launch (from 4 to 3), while the space systems midpoint of guidance was unchanged.

However, according to the analyst's estimates, launch revenues in 2023 could be impacted by roughly $22.5 million due to the satellite launch mission's premature termination.

The analyst is encouraged by the relatively limited impact on GMs, demonstrating better-than-expected launch costs (BOM, labor, and direct OH) as ongoing cost optimization efforts are beginning to kick in. 

Management also does not anticipate any material incremental expenses in 3Q as a result of this anomaly, Rasmussen adds.

Depending on the results of its internal investigation and the timing of approval from the FAA, the analyst expects a more reasonable cadence of 3 launches in 4Q (from 5).

For 3Q23, Rasmussen cut the revenue estimate from $75.5 million to $67.5 million. The analyst's 3Q estimate for Electron launches is reduced from 4 to 3, with no changes to Space Systems.

The analyst's 3Q23 margin assumptions are expected to align with the updated guidance, which will slightly impact the analyst's Adj. EBITDA estimate from -$13.4 million to -$14.4 million due to the lower revenue contribution from launch services and to better align with previous guidance.

Price Action: RKLB shares are trading higher by 1.29% to $4.29 on the last check Wednesday.