Rocket Lab shares tumbled 13.1% to $124.74 in late-morning trading on Monday, pulling back sharply after a recent rally that had propelled the stock well above most analyst price targets. The decline comes as investors recalibrate their expectations ahead of SpaceX's highly anticipated initial public offering, which is expected to be the largest in history.
SpaceX is targeting a Nasdaq listing as soon as June 12, aiming to raise approximately $75 billion at an estimated valuation of $1.75 trillion, according to Reuters. The magnitude of that offering has prompted some traders to reassess smaller space stocks that had surged on earlier news, particularly Rocket Lab, which has been viewed as a direct public-market proxy for the space sector.
Rocket Lab has been riding a wave of positive headlines. On May 21, the company announced a $90 million contract with the U.S. Space Force to design, build, and operate two geostationary satellites equipped with space domain awareness payloads. Additionally, the company completed its acquisition of Motiv Space Systems last week, rebranding it as Rocket Lab Robotics. CEO Peter Beck stated that the buyout provides the company with the capabilities needed for Mars missions and complex space infrastructure projects.
Despite these developments, concerns about Rocket Lab's valuation and execution risks are weighing on investor sentiment. The stock trades at an enterprise value of 124 times trailing sales, a multiple that Seeking Alpha contributor The Sharpe Quest described as "demanding." The analyst noted that the company's 2028 targets would require flawless execution and a successful ramp-up of the Neutron rocket, which has yet to make its first flight.
Rocket Lab reported first-quarter revenue of $200.3 million, a 63.5% increase year over year, with GAAP gross margin of 38.2%. The company's backlog stands at $2.2 billion. While the financial performance has been strong, the market is now questioning whether the current price adequately reflects the risks associated with the Neutron rocket's development and the potential for SpaceX's IPO to divert capital from other space names.
SpaceX itself is not without risks. The company's IPO filing revealed a $4.28 billion quarterly loss. Josh Gilbert, an analyst at eToro, told Reuters that the key question is whether SpaceX's valuation accounts for the challenges ahead in rockets, Starlink, and AI, given how closely the company is tied to Elon Musk's vision.
Meanwhile, Blue Origin faces fresh uncertainty after its New Glenn rocket exploded during a test last week, damaging the launch pad and potentially causing multi-month delays. "It will take months to rebuild," Antoine Grenier of Analysys Mason told Reuters, though he noted that Blue Origin could recover. Seraphim Space CEO Mark Boggett said the market still needs more options, even as SpaceX gains short-term leverage.
Rocket Lab's defense business is gaining traction. On May 27, the company announced it had cleared a System Requirements Review for the Space Development Agency's Tracking Layer Tranche 3 missile-warning satellites, a key early design milestone. Brad Clevenger, president of Rocket Lab USA, said the review demonstrates the company's "technical readiness."
With shares now down sharply, investors are questioning whether the SpaceX effect had already pushed Rocket Lab too far. The company has a solid order book, a growing defense presence, and a clear path to expand under SpaceX's shadow. But until the Neutron rocket flies and the valuation becomes more grounded, the stock may remain volatile.
