Rocket Lab Shares Maintain Momentum on Defense Contracts and Analyst Optimism

Rocket Lab USA's equity continues its impressive ascent, building on a powerful year-end surge with substantial gains in the new year. The rally is primarily fueled by significant defense sector contracts and a series of successful satellite missions, prompting market observers to scrutinize the company's current valuation.

The stock's upward trajectory is supported by several concrete developments:

• Major U.S. Space Force Contract: On December 18, the company announced its largest contract to date from the U.S. Space Development Agency (SDA), valued at $816 million. Rocket Lab is tasked with designing and building 18 satellites for the Tracking Layer Tranche 3 program.
• Contract Upside Potential: The total value of this agreement could expand to approximately $1 billion through $10.5 million in extension options and additional service provisions.
• Canadian Space Agency Agreement: A separate contract was secured to support the development of Canada's national space capabilities.
• Successful JAXA Mission: The company completed a successful launch from New Zealand for the Japanese Aerospace Exploration Agency's (JAXA) Innovative Satellite Technology Demonstration Program.
• Sector-Wide Tailwinds: Industry-wide valuations received a boost from speculation regarding a potential initial public offering for SpaceX by the end of 2026.

Performance and Valuation Context

Rocket Lab's shares delivered standout performance in December, soaring 65.5%. This significantly outpaced the major U.S. indices, with the S&P 500 moving sideways and the Nasdaq Composite dipping 0.5% during the same period. The momentum has carried into January, adding a further 21.6% gain. The stock currently trades in the $85 to $87 range, reflecting a market capitalization between $45 billion and $46 billion.

This valuation has become a focal point for discussion. Based on trailing twelve-month figures, the shares trade at approximately 77 times revenue. The market cap of around $45 billion contrasts with annual revenue of about $555 million. The company remains unprofitable, reporting a loss per share (EPS) of -$0.38 over the past twelve months.

Analyst Sentiment and Price Targets

Following the Space Force contract announcement, several research firms revised their assessments upward. Stifel reaffirmed its Buy rating, lifting its 12-month price target from $75 to $85 per share. Needham was more bullish, raising its target from $63 to $90 while maintaining a Buy recommendation.

The consensus average price target currently stands at $68.25, with a range spanning from $51 to $90. Among the 13 analysts covering the stock, nine recommend a Buy, while four advise a Hold.

Should investors sell immediately? Or is it worth buying Rocket Lab USA?

Strategic Shift Toward Defense

The $816 million SDA award is viewed as a pivotal milestone, positioning Rocket Lab as a prime contractor for sensitive national security space programs—a domain traditionally dominated by large, established aerospace and defense giants.

The satellites will be equipped with sensors for missile warning, tracking, and defense, aiming to establish a persistent global capability to monitor emerging threats, including hypersonic weapons. Furthermore, Rocket Lab's StarLite shielding sensors are also being utilized by other prime contractors developing TRKT3 satellites, opening avenues for additional revenue.

Combined with an existing $515 million contract for the SDA's "Transport Layer-Beta Tranche 2" program, the company's total backlog for SDA projects now exceeds $1.3 billion.

Looking Ahead to Financial Results

Analyst estimates for the fourth quarter of 2025 project adjusted EPS of -$0.05 on revenue of approximately $177.5 million, which would represent year-over-year growth of 34.1%. For the full 2026 fiscal year, the consensus forecast calls for revenue of $879.5 million and a GAAP EPS of -$0.24.

The next significant catalyst will be the release of fourth-quarter and full-year 2025 financial results, scheduled for late February. This report is expected to provide clarity on how effectively the robust contract growth is translating into top- and bottom-line performance and whether the current market valuation is justified.