Rocket Lab Faces Investor Scrutiny After Neutron Rocket Test Setback

Rocket Lab USA finds itself navigating a critical juncture. The company's ambitious expansion, centered on its next-generation Neutron rocket, has encountered a technical hurdle. This development arrives as institutional investors demonstrate continued confidence and Wall Street analysts present sharply divided views on the stock's trajectory.

Despite recent challenges, significant investment flows suggest a long-term belief in Rocket Lab's strategy. On January 25, 2026, Rakuten Investment Management purchased 11,426 shares, a transaction valued at approximately $547,000. In a separate move, Germany's Universal Beteiligungs und Servicegesellschaft mbH increased its stake by 22.0% during the third quarter, now holding 227,988 shares worth over $10.9 million.

Adding considerable weight, Norges Bank maintains a substantial position valued at $164.75 million. These actions indicate that major institutions may be interpreting recent stock price volatility as a buying opportunity, anchored by the thesis of stable Electron rocket revenue coupled with Neutron's future potential.

The Neutron Program's Structural Hiccup

The focal point of current market discussion is a confirmed structural failure during testing. A hydrostatic pressure qualification test on the Neutron rocket's first-stage tank resulted in a tank rupture. While the company has characterized this as part of standard validation processes, with no damage to infrastructure, the incident necessitates building a replacement tank.

This introduces a tangible schedule risk. The manufacturing delay is expected to impact the broader test campaign, potentially disrupting Neutron's tightly sequenced development timeline. Management has committed to providing a detailed update on the launch schedule during its Q4 2025 earnings call in February. Investors are now questioning whether the inaugural Neutron launch—and the new revenue streams tied to it—will be pushed back.

Operationally, Rocket Lab's core business continues uninterrupted. The company successfully completed its first mission of 2026, which was also the 80th launch of its smaller Electron rocket. This ensures ongoing income from the established small-launch segment, providing a financial foundation as Neutron represents the long-term growth narrative.

Should investors sell immediately? Or is it worth buying Rocket Lab USA?

Divergent Analyst Perspectives

The analyst community is currently split into distinct camps. On January 16, 2026, Morgan Stanley upgraded the stock to "Overweight" with a $105 price target. Bank of America adopted an even more bullish stance, setting a $120 target. Both firms base their optimism on the strategic potential of the Neutron program and Rocket Lab's commanding position in the small launch vehicle market.

A more cautious view exists alongside this optimism. KeyBanc downgraded the stock to "Sector Weight" on January 15, 2026, citing valuation concerns. With the company reporting a negative price-to-earnings ratio and a consensus analyst price target of approximately $72.92, the average expectation sits well below the recent trading price of $88.90. This gap highlights the market's dilemma: bullish forecasts hinge on successful Neutron milestones, while skeptics warn that the stock may already be pricing in an optimistic future.

Financial Health and Market Technicals

Beyond the headlines, Rocket Lab's financials illustrate both its appeal and its risks:

• Trailing Twelve-Month Revenue: $554.53 million
• Quarterly Revenue Growth: +47.97%
• Trailing Twelve-Month Net Income: -$197.63 million

The figures reveal a company growing rapidly yet still operating at a loss. Market technicals suggest the stock has experienced significant momentum: the 14-day Relative Strength Index (RSI) stands at 85.1, deep in overbought territory, while the share price trades more than 30% above its 50-day moving average and over 80% above its 200-day line.

In summary, Rocket Lab stands at a pivotal moment. The reliable performance of Electron and robust revenue growth support the investment case. However, the Neutron test anomaly, sustained capital investment, and a premium valuation warrant caution. The extent to which this setback delays Neutron's timeline—and consequently shifts medium-term revenue expectations—will be clarified in management's February update on the Q4 2025 results, an event likely to shape the stock's near-term direction.