Rocket Lab’s Latest Acquisition Merits a Price Target Hike, Says Needham

Rocket Lab USA (NASDAQ:RKLB) shares have been hot property on Wall Street over the past year, with the stock up by a humungous 592%. The company’s strategic acquisitions and consistent launch cadence have boosted investor confidence in the aerospace company’s ability to capture a larger share of the space industry, making it well-placed to challenge segment leader SpaceX.

On Tuesday, the company further improved its positioning when it announced plans to acquire Geost LLC, a company specializing in electro-optical and infrared payloads for national security applications. The purchase will cost $275 million – $125 million in cash and $150 million in RKLB stock, plus up to $50 million in potential cash earn-outs. Geost already works with defense clients similar to Rocket Lab, such as the SDA, U.S. Air Force, and Space Force, and this deal represents RKLB’s first move into the payload market. The company anticipates Geost will generate an annual revenue run rate of around $60 million and be neutral to slightly accretive to AEBITDA in the second half of the year. The deal is expected to close in 2H25, with RKLB financing the acquisition using its cash and equivalents, which totaled $517 million at the end of F1Q25.

This is a good move, says Needham analyst Ryan Koontz. “Though little is known about Geost due to its customers’ classified nature, we see the acquisition as a boost to RKLB’s standing as a prime contractor as it bids for a number of large government contracts, potentially including Golden Dome,” the analyst said.

By adding advanced sensing technologies used for missile tracking and warning, earth observation, surveillance, reconnaissance, and related defense applications, Geost expands Rocket Lab’s presence in the U.S. national security space market. It also made sense for Geost to jump on board. “We suspect Geost’s lack of scale drove some of its key customers to encourage the company to seek a combination with a fiscally stronger partner,” Koontz opined.

Rocket Lab anticipates the acquisition will strengthen its position in securing government contracts such as SDA Tranche 3 and the Golden Dome program. Koontz thinks It’s likely that Rocket Lab has already bid on Tranche 3 with Geost, and as Geost continues to supply other defense primes, its potential contract wins – both through Rocket Lab as the prime contractor and via third parties – are expected to boost Rocket Lab’s revenue growth.

Bottom line, the acquisition merits a new price target from Koontz. His figure goes from $28 to $32, suggesting the stock will gain another 10.5% over the coming months. Koontz’ rating stays a Buy. (To watch Koontz’s track record, click here)

7 other analysts join Koontz in the bull camp and with an additional 4 Holds, the stock claims a Moderate Buy consensus rating. However, the $28.8 average target implies the stock will stay rangebound for the time being. (See RKLB stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.