Rocket Lab USA (NASDAQ:RKLB) opened trading on Wednesday with a 3.3% swing lower to add to double-digit drop on Tuesday tied to the loss of the company’s rocket and payload. Rocket Lab (RKLB) announced that the mission, which was carrying a synthetic aperture radar Earth imaging Acadia satellite for Capella Space, experienced an anomaly at ignition of the second stage’s Rutherford engine that resulted in the end of the mission and the loss of the payload.
The incident was Rocket Lab’s (RKLB) first failure since May of 2021 and will lead to an FAA investigation to determine the exact cause of the mission failure.
Bank of America analyst Ronald Epstein said the mission data provided during the livestream showed that the rocket began to lose speed right after fairing separation, when the second stage Rutherford engine should have ignited and begun to accelerate the rocket. As for the stock, Epstein noted that the Capella mission is still recognized as revenue, considering that Rocket Lab (RKLB) is already paid for the launch attempt. However, Rocket Lab (RKLB) suspended its Q3 outlook after the failure and signaled that the next mission will be delayed. Of note, the company is unable to launch again until the FAA concludes its investigation.
“While there will be no launches until the FAA investigation is complete, Electron production is expected to continue. One third of the build cost (~$5mn) still occurs on a cash basis, of which roughly half is labor and the other half is overhead. The company signaled that 13 launches would be a good outcome for the year, but cautioned that this is not the official outlook.”
Epstein said that assuming three delayed launches and a ~$1.5M cash burn/rocket related to continued production, RKLB could experience a ~$4.5M negative cash impact in 2023 as a result of the failed mission. While BofA is awaiting further clarity from the company and regulators before adjusting its model, it did keep a Buy rating in place as it continues to see Rocket Lab (RKLB) as a best-in-class space stock.
Meanwhile, Citi analyst Jason Gursky noted that previous RKLB pauses have lasted one to three months, but the company has had continued success in securing U.S. national security launches over the last several years. The firm thinks that a more comprehensive analysis will be done this time around and that the pause could last upward of six months. Citi revised its model accordingly and decreased its price target on Neutral-rated RKLB to $5.75 to reflect the expectation for a six-month launch pause and a lower valuation multiple.