Marksman Monday Update

Overview 

Heading into 2025, Rocket Lab is trying to compete with SpaceX with their own reusable rocket to put to use in the growing space industry. As an incredibly competitive space, Rocket Lab aims for growth through M&A and in-house R&D into new technology with varying degrees of success. New developments drive Rocket Lab’s growth in relation to more established competitors. Although currently underperforming compared to dominant players such as SpaceX, Rocket Lab’s neutron rocket looks to play catch up via cost efficiency and development milestones. 

Where is Rocket Lab In Development? 

In the long run, the space industry will have come close to, if not fully realized the benefits of commercial transportation, a market that is heavily dependent on frequency and cost-efficiency. For Rocket Lab to be able to thrive in this market, the company culture should continue to be centered around innovation. They’ve seen notable success in doing so with the second launch of a 3D printed engine in the Electron and should be striving to continue creating “firsts” and breakthroughs with their rocket technology. The Neutron project is a prime example of this, being the first rocket to have a reusable first-stage and utilize 3D printing to build components of its Archimedes engine. Building the largest carbon composite fiber placement machine saved over 15,000 hours of manufacturing, allowing time for Rocket Lab to innovate in the short and long term. The company can now test flight mechanisms and correct any potential defects that arise when constructing Neutron’s Stage 1 build. Looking forward, the 99-ton machine can be used to manufacture other spacecraft components, which can be improved upon with the 3D printer’s real-time inspection system. With each step of progress in innovation, Rocket Lab becomes a bigger competitor to SpaceX, giving the company more incentive to keep tinkering and discover newer solutions toward cost-efficient reusability. 

Heading into 2025, Rocket Lab is going to benefit immensely from new government awards and (likely) a faster permitting process for rocket launches.

Rocket Lab’s Vision 

This week, we dove deeper into what Peter Beck’s intentions are as the CEO of Rocket Lab. It’s apparent that his primary objective for Rocket Lab is for it to become an end-to-end space company.

His goal is to transition from solely a launch provider to offering various space solutions, including satellite design, manufacturing, and on-orbit management. Beck notes that to compete with competitor offerings, like Starlink, the scalability of satellite production and launch is essential. He further notes that smaller space companies often struggle to meet Rocket Lab’s demand for parts. This leads Rocket Lab to pursue acquisitions of these smaller companies and invest in in-house manufacturing. A key example of this strategy is Rocket Lab’s acquisition of Sinclair, a manufacturer of reaction wheels. Rocket Lab is helping them scale this up. They previously only made 150 a year. Now? They produce over 2,000.

Rocket Lab’s Electron rocket has become the second most frequently launched U.S. rocket annually. For a company that is not nearly as well known as SpaceX, this demonstrates incredible reliability . The company has expanded into spacecraft production, most notably through developing the Photon satellite platform.

Once again (in character of the company’s strategy) Rocket Lab has acquired a series of smaller space manufacturing companies to streamline the satellite production process. 

Though becoming an end-to-end space company is Beck’s most important and ambitious initiative, it is important to note that the first launch of the Neutron rocket in 2025. Neutron will be a partially reusable launch vehicle designed to deploy satellite constellations and break up the medium launch monopoly we have today. This goal has substance because Rocket Lab successfully conducted the first hot fire test of the Archimedes engine in August 2024, a significant advancement in the rocket's development. The company has also completed the first full-scale carbon composite rocket-building machine for Neutron. 

How Should Gauge Rocket Lab’s Performance? 

With regards to the company’s market share, it falls far behind that of SpaceX. SpaceX was responsible for 87% of launches in 2023. It’s important to note however that Rocket Lab is in a position to experience further growth, controlling 64% of the market that isn’t SpaceX. Its initiatives to advance its scale are sought after through partnerships. Rocket Lab has been involved in a partnership with Kongsberg Satellite Services (KSAT), which aims to accelerate Rocket Lab’s communications, and support further space exploration.

While this is an old partnership, this enables the company to continue to expand and equip rockets with better technology to ensure safety and efficiency.

Rocket Lab has launched 197 satellites, which adds to the over 1,700 satellites total that have been launched and include Rocket Lab technology. Whereas, SpaceX has done over 392 total launches, and dwarfs Rocket Lab when it comes to their 6,400 Starlink satellites in orbit.

In terms of costs per launch, Rocket Labs’s Electron comes in at $25,000/kg. While SpaceX’s Falcon 9 significantly undercuts that with a launch cost from $3,000 to $6,000/kg, Rocket Lab’s Neutron offering aims to close that gap, with a range of $3,300 to $4,230/kg. SpaceX may already have economies of scale benefits, yet Rocket Lab has a plan to catchcup.

Risks 

Rocket Lab’s ability to use 3D printing should be a huge advantage for them as they compete in the reusable rocket market (long run this should help control costs).

However, Rocket Lab has not launched a rocket that was built using this technology. The only company to use 3D printing technology for rockets has not had a successful launch with their key tech. The risk for Rocket Lab is the technology will not work properly and their R&D spending will be a waste.

I think in the long run this is a risk that can be easily managed. 3D printing technology is rapidly advancing. Rocket Lab should be able to ride this rising tide.

Bottom line

Rocket Lab is positioned to deliver on estimates with its unique technology. While 2025 is a crucial year for their trajectory (their Neutron launch needs to go well) we feel confident they are laying the foundation for success.

Disclosure: At the time of this publication some members affiliated with Marksman Research own stock, options or other interest in RKLB.