Rocket Lab Shares Surge to Record Highs on Major Defense Contract

Rocket Lab USA's stock is experiencing a historic rally, propelled by the largest single contract in the company's history. The $816 million award from the U.S. Space Development Agency (SDA) has sent shares to new all-time highs, though a recent analyst downgrade citing valuation concerns has introduced a note of caution to the bullish sentiment.

The core catalyst for the current surge is an $816 million contract with the SDA. Under this agreement, Rocket Lab will serve as the prime contractor, responsible for the design and construction of 18 satellites for the Tranche 3 Tracking Layer program. These satellites are intended for advanced missile warning and tracking capabilities, cementing the company's role as a key partner to U.S. national security agencies.

This landmark deal does more than significantly boost the company's order backlog; it validates a crucial strategic shift. Rocket Lab is successfully transitioning from a pure-play launch provider to a fully integrated space systems company.

Diverging Analyst Views Create Market Tension

The market's powerful reaction has highlighted a clear split in analyst perspectives.

On the bullish side, Baird has raised its price target to $100 per share. The firm cites the improved revenue visibility provided by the SDA contract and anticipated growth between 2026 and 2030. Needham increased its target from $63 to $90, reaffirming its Buy rating. Both institutions view the defense award as a structural change to the company's revenue profile.

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

Adopting a contrary stance, KeyBanc Capital Markets has downgraded the stock from Overweight to Sector Weight. Analyst Michael Leshock pointed to an overextended valuation following a share price gain of more than 250% within a single year. From KeyBanc's viewpoint, the current stock price already largely reflects the successful execution of Rocket Lab's primary growth drivers, leaving limited room for operational setbacks.

Operational Excellence and the Neutron Catalyst

Beyond the valuation headlines, Rocket Lab continues to post strong operational results. In 2025, the company successfully completed 21 Electron launches, achieving a 100% success rate and cementing Electron's status as one of the most frequently launched rockets globally.

The next critical milestone is the inaugural flight of the new Neutron rocket, scheduled for mid-2026. Designed as a reusable medium-lift launch vehicle, Neutron directly targets the market segment currently dominated by SpaceX's Falcon 9. The success of this program is considered fundamental to justifying the company's current market valuation of approximately $49 billion.

Market Dynamics: High Volatility and Insider Activity

Trading activity reflects a highly dynamic and volatile environment:

• Price Action: The stock is trading near record levels, accompanied by significant intraday price swings.
• Resistance Zone: The $90 to $92 price range is acting as a key psychological resistance level that is currently being tested.
• Support Level: Technical analysts identify a robust support zone around $69 to $70 should a market correction occur.
• Insider Transactions: Over the past 90 days, insider selling has totaled more than $260 million. Some retail investors interpret this activity as a cautious signal following the steep price appreciation.

Conclusion: Growth Momentum Meets Valuation Scrutiny

Rocket Lab is firmly in an upward trend, driven by the $816 million SDA contract and a flawless operational record with its Electron rocket. However, the downgrade from KeyBanc has brought valuation risks into sharper focus. The stock's future trajectory will likely hinge on two pivotal factors: the tangible financial impact of the major defense contract in the coming years, and the on-schedule progress of the Neutron program leading to its targeted debut in mid-2026.