Why Rocket Lab Stock Rocketed More Than 40% Wednesday Morning

Rocket Lab (RKLB 29.00%) stock lived up to its name this morning as shares were up 44% at 10:45 a.m. ET after an encouraging earnings report Tuesday evening.

Heading into the Q3 report, analysts had forecast Rocket Lab would lose $0.11 per share on quarterly sales of $102.3 million. The company instead reported sales of $104.8 million, and a loss of $0.10 per share.

Rocket Lab revenue rose 55%. Granted, losses also rose, up 25% from $0.08 per share one year ago. Still, if you pull back to examine the bigger picture and smooth out quarterly lumpiness, losses year-to-date are only $0.28 per share -- similar to last year.

Plus, it's not Rocket Lab's current losses that investors are focusing on. Wall Street analysts say Rocket Lab won't turn profitable before 2027, so Q3 losses were to be expected. What investors really sought in last night's report was progress toward eventual profitability -- and Rocket Lab delivered that in spades.

This manufacturer of small rockets and spacecraft signed $55 million in new Electron launch contracts in Q3, more than enough to replenish quarterly launch revenue. It forecast Q4 revenue of between $125 million and $135 million, implying revenues will at least double in comparison to last year's Q4 haul of just $60 million. And further down the line, Rocket Lab promised even more revenue from its launch business, signing up an undisclosed customer to fly "multiple launches" on Rocket Lab's new Neutron medium-lift vehicle.

In fact, confidence in Neutron is so high right now, that this customer apparently plans to use the rocket to deploy its entire planned constellation of satellites.

Translation: Look out, SpaceX. Rocket Lab is coming for your biggest market.

Priced at 22 times sales and infinity (and beyond) times earnings (which it doesn't have), it's hard to defend Rocket Lab's share price on valuation. Lucky for Rocket Lab, right now investors only think of it as a growth stock. So long as Rocket Lab keeps growing, the share price should continue to outperform.