Why Shares of Rocket Lab Are Crashing This Week

Shares of Rocket Lab (RKLB -17.11%) soared to start off the week, but the launch-specialist’s stock lost altitude in subsequent days. Failing to raise investors’ spirits, Rocket Lab announced disappointing preliminary fourth-quarter 2023 results and a plan to raise capital on Wednesday.

According to data provided by S&P Global Market Intelligence, shares of Rocket Lab have fallen 17.6% from the end of last Friday’s trading session through the market’s close on Thursday.

The bottom of the income statement will be far from out of this world

Although management expects to report Q4 2023 revenue that represents year-over-year growth of about 16%, it’s preparing investors for a less auspicious report in terms of profitability. The company reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $14.5 million in Q4 2022, but management projects the shortfall will widen from negative $28 million to negative $30 million for the recently completed quarter.

Fearing shareholder dilution, investors also balked at the company’s plan to raise capital through the offering of $275 million in convertible senior notes.

What should Rocket Lab investors do now?

For growth investors who count Rocket Lab among their holdings, the best course of action right now is to stand pat. While the company’s announcement this week may seem disconcerting, there are compelling reasons to not abandon this leading space stock.

Instead of rushing to trim or exit their positions, investors would be better served to tune in for the company’s fourth-quarter 2023 earnings presentation, scheduled for Feb. 27. At that time, investors will gain greater insight into the company’s financials and be better equipped to decide whether to eject the stock from their portfolios.