‘Momenum Stays Ahead of Valuation,’ Says Analyst on Rocket Lab Stock (RKLB)

Rocket Lab USA (RKLB) stock has been on a tear, posting one of the strongest performances among its space-sector peers over the past year. The company—which builds rockets, satellites, and space infrastructure for defense—has rallied on the back of defense contract wins, its booming Space Systems business, and an increasingly bullish outlook for Neutron, its medium-lift launch vehicle.

That said, as the story has strengthened, so has the valuation. Shares have more than doubled over the past one and a half months, reflecting investors’ growing confidence in the thesis.

This article lays out why Rocket Lab’s fundamentals are arguably better than ever—while also explaining why, at current levels, the stock has become more a question of timing and price than conviction in the underlying business. While I remain constructive on the company’s long-term direction, my stance on the stock today is neutral.

Rocket Lab Is No Longer Just a Launcher

The Long Beach, California–based space company has recently crossed an important turning point: launches are no longer its core economic driver—something that, for most of its history, they clearly were.

At present, roughly two-thirds of the company’s total revenue comes from Space Systems (satellite buses, avionics, flight software, and related services), not launch services. Even so, the stock continues to be largely framed as a launch cadence story, where valuation sensitivity remains tied to Electron’s (small rocket) flight frequency rather than to long-duration, contract-backed revenue.

And this mismatch matters—a lot. Space Systems revenue is fundamentally different, driven by multi-year contracts with high switching costs and production deeply embedded within customer architectures. Over the last twelve months, for example, Space Systems accounted for the majority of Rocket Lab’s more than $1.1 billion in contracted backlog, while launches remain largely transactional. As a result, revenue visibility is materially higher than that of pure-play launch models.

Margin implications are also underappreciated. Launch services are capital-intensive and competitively priced, while Space Systems allow Rocket Lab to capture value across a wide range of integrated offerings. As a result, the company’s R&D spending—running at roughly ~45% of revenue in recent quarters—has increasingly been converted into awarded programs, most notably the recently secured $816 million U.S. Space Development Agency Tranche 3 Tracking Layer contract, rather than remaining purely speculative. This shift supports the case for future operating leverage as production volumes scale.

Defense is the Inflection Point

Still on the subject of the Tranche 3 award from the SDA, this development is much less about headline size and much more about who Rocket Lab is competing against today. In simple terms, the mission focuses on the detection, tracking, and monitoring of missile launches in near-real time on a global scale.

In Tranche 3, Rocket Lab was selected to be directly responsible for 18 satellites, alongside legacy defense primes such as L3Harris (LHX), Lockheed Martin (LMT), and Northrop Grumman (NOC). This marks a meaningful credibility shift for a company that had long been characterized as an “emerging space player,” positioning it instead as a strategic partner to the U.S. Government.

What makes this contract structurally important is the full-stack responsibility Rocket Lab assumes. As a prime contractor, the company delivers the Lightning satellite bus, its proprietary Phoenix infrared payload (the heart of the mission), and StarLite survivability sensors designed to protect against targeted attacks. This level of vertical ownership means mission performance depends directly on Rocket Lab, materially increasing switching costs and reducing the risk of being treated as a replaceable hardware supplier.

It is also worth noting that the ~$816 million headline award likely understates Rocket Lab’s true exposure. Beyond its role as a prime, the company is positioned as a merchant supplier of satellite buses and subsystems to other Tranche 3 winners. Combined with the roughly $515 million previously awarded under the SDA Transport Layer, Rocket Lab now participates across two distinct layers—tracking and transport—creating a multi-layer relationship with the SDA and pushing total economic exposure above $1 billion within the broader SDA architecture.

Neutron Brings Scale, but the Risk Has Shifted to Valuation

With regard to Neutron—Rocket Lab’s reusable medium-lift launch vehicle designed to carry roughly ~15 tons to Low Earth Orbit (LEO)—I no longer see it as a theoretical upside option, but rather as an active execution program. Management has confirmed plans to have the rocket on the pad in Q1 2026, with a first launch expected shortly thereafter, barring normal development risk. At ~15 tons to LEO, Neutron places Rocket Lab squarely in the medium-lift category, capable of competing with SpaceX’s Falcon 9 and materially expanding the company’s addressable launch market.

Beyond commercial launches, Neutron also pushes Rocket Lab into sovereign access, rapid defense deployment, and higher-mass national security missions that Electron simply cannot serve. As the company’s CFO, Adam Spice put it, “if you’ve got to put a lot of mass on orbit quickly, owning that launch vehicle is absolutely key.”

The main issue here is timing versus valuation. After more than doubling its market value since December last year, Rocket Lab now trades at roughly 83x EV/Sales, leaving virtually no room for execution slip-ups. While the balance sheet is solid—with $976 million in cash and short-term investments against $517 million in debt—much of that cash strength came from equity issuance, resulting in approximately ~7% shareholder dilution over the past twelve months. At current levels, downside risk therefore appears far more valuation-driven than business-driven.

Is RKLB a Buy?

Analyst consensus on RKLB remains broadly bullish, albeit with some room for caution. Of the 11 ratings issued over the past three months, eight are bullish, three are neutral, and none are bearish. The average price target stands at $73.11, implying almost 20% downside in 2026.

See more RKLB analyst ratings

Owning the Rocket Lab Story, Waiting on the Price

I believe the best way to position oneself in Rocket Lab today is to be bullish on the business, but cautious on the stock. The company is executing well, continues to strengthen its position in defense through structural contracts, and has meaningfully expanded its addressable market with Neutron. However, after a sharp recent repricing, the market already appears to be discounting optimistic outcomes around Neutron’s success, continued SDA awards, and margin expansion that has yet to materialize.

As a result, I view the stock as a disciplined Hold at current levels. A pullback driven by macro factors or a broader risk-off move could reopen a more attractive entry point, as could clear evidence of operating leverage in the Space Systems segment or a successful first Neutron flight without cost overruns. Until then, the risk profile appears more skewed toward valuation compression than any deterioration in the company’s underlying fundamentals.