Rocket Lab shares stabilise as defence wins offset Neutron delay

Rocket Lab shares have stabilised after falling more than 50 per cent from their May peak, a decline driven by a sector-wide rotation following the SpaceX IPO. The stock, which reached a high of $151 in May, has found a well-defined support level near $60, having bounced sharply off that mark in late July. While the selling pressure from the post-IPO panic appears to be easing, the shares remain volatile as investors weigh the company’s high valuation against its operational momentum.

The company’s 10 August earnings report provided a clearer picture of its financial health, revealing record quarterly revenue and a backlog that has surpassed $2.3 billion. Rocket Lab also signed more than $1 billion in new contracts during the quarter. Although the market’s initial reaction was muted due to softer third-quarter margin guidance tied to heavy spending on the Neutron rocket, the fundamental data suggests the business is posting its best operational numbers to date.

Defence remains a critical growth driver, with Rocket Lab steadily transforming into a major national security contractor. In the past week alone, the company was onboarded to the US Space Force’s NITE-STAR program, a training and wargames architecture effort with a ceiling of up to $981 million. It also secured a geostationary satellite bus role from Viasat for a protected military communications system and a separate award tied to the Space Force’s Space Data Network.

These recent wins follow a $397 million Flatellite contract and a record $266 million missile-defence launch deal announced earlier in August. Despite this relentless flow of contract announcements, the stock has repeatedly sold off or traded sideways on the news, a disconnect attributed primarily to valuation concerns and the status of the Neutron rocket.

Investors remain cautious because Rocket Lab trades at more than 70 times trailing sales, an extraordinary multiple for a company that remains unprofitable with a trailing net loss near $198 million. The Neutron rocket, which is essential for launching programs like the Flatellite constellation, has slipped to a fourth-quarter debut due to a Stage 1 tank issue. Until Neutron flies, a portion of the bull case remains theoretical, keeping the stock subject to significant swings.

Analysts, however, maintain a Moderate Buy consensus across 22 ratings, with an average price target of $110.65, implying approximately 50 per cent upside from current levels. Only one of the 22 analysts covering the stock has assigned a Sell rating. For long-term investors, the current zone offers a more reasonable entry than the May highs, provided the $60 support level holds and the Neutron debut proceeds as scheduled.