Redwire Corporation (NYSE: RDW) experienced a sharp decline in late-morning trading on Monday, with shares falling 16.4% to $20.53 after starting the session at $22.66. The drop came as Jefferies downgraded the stock from Buy to Hold, despite raising its price target to $24 from $13. Trading volume surged to over 25.8 million shares, well above average.
The downgrade reflects growing concern that the recent rally in space stocks may have outpaced fundamental improvements. Redwire's stock had soared 163% in the past month alone, driven by heightened enthusiasm surrounding the anticipated initial public offering of SpaceX. However, Jefferies analyst Sheila Kahyaoglu noted that while the excitement around the space sector has lifted Redwire's share price, the near-term upside now appears limited.
Redwire's enterprise-value-to-sales multiple has expanded to 8.8 times revenue, up sharply from 3.8 times at the start of the year, according to Jefferies. This valuation expansion, combined with the stock's strong year-to-date gains, prompted the downgrade.
The broader space sector also traded lower on Monday. Rocket Lab USA (RKLB) fell 13.7%, Intuitive Machines (LUNR) dropped 11.9%, and AST SpaceMobile (ASTS) declined 8.5%. The Procure Space ETF (UFO) slid 7.2%, underscoring the widespread retreat in space-related equities.
Despite the stock's negative performance, Redwire's latest financial results showed robust growth. First-quarter revenue surged 57.9% year-over-year to $97.0 million, while backlog reached a record $498.1 million. The company's book-to-bill ratio stood at 1.92, indicating that new orders significantly outpaced recognized revenue. However, net loss widened to $76.5 million, largely due to more than $44 million in non-recurring items. Redwire maintained its 2026 revenue guidance of $450 million to $500 million.
CEO Peter Cannito highlighted strong demand, noting that the company continues to see momentum across its defense and space technology segments. On May 20, Redwire announced a $15 million follow-on order from the U.S. Army for its Stalker uncrewed aerial systems. Additionally, the company recently secured a multi-year contract in the high eight figures from an unnamed NATO country for its Penguin Mk3 tactical drones.
However, the positive contract news may not be enough to offset investor concerns about valuation. Redwire also has a $350 million at-the-market equity offering outstanding, which could weigh on the stock if executed. In regulatory filings, the company has warned that the potential sale of shares in the open market could pressure the stock price.
Monday's decline appears to be more of a price reset than a fundamental shock. Redwire's order pipeline remains strong, but after such a dramatic run-up, the stock is now being priced on how much of its future growth is already reflected in the share price.
