Rocket Lab stock jumps as KeyBanc upgrade revives space sector

Rocket Lab RKLB shares climbed more than 6% on Monday after KeyBanc Capital Markets upgraded the stock, arguing that the recent selloff across space-related equities following SpaceX's blockbuster public debut was overdone.

The rally came as investors returned to space stocks after a sharp decline on Friday, when Elon Musk-led SpaceX began trading on the Nasdaq and quickly became one of the most valuable publicly listed companies in the market.

Rocket Lab shares rose to around $110.60, recovering part of the 11% decline recorded on Friday.

Firefly Aerospace also gained more than 6%, rebounding from a 19% drop in the previous session.

Meanwhile, SpaceX extended its gains, rising another 8% after surging 19% during its debut.

KeyBanc upgrades Rocket Lab and Firefly

KeyBanc analyst Michael Leshok upgraded both Rocket Lab and Firefly Aerospace to Overweight from Sector Weight.

The firm assigned a $135 price target to Rocket Lab and a $50 target to Firefly, implying meaningful upside from current trading levels.

“Last Friday’s record-setting SpaceX IPO sent ripple effects across our coverage of space-centric equities, with the sector selling off sharply on IPO day and over the weeks leading up to it,” Leshok wrote. “We think this is unwarranted and largely systematic in nature, as funds make room for the space behemoth.”

The analyst argued that the sector-wide weakness was not driven by deteriorating fundamentals but rather by portfolio repositioning as investors allocated capital toward SpaceX following its public listing.

The selloff affected several space companies.

Alongside Rocket Lab and Firefly, shares of AST SpaceMobile, Intuitive Machines, Voyager Technologies and Redwire all posted double-digit declines on Friday. Most of those stocks recovered some ground on Monday.

Fundstrat economic strategist Hardika Singh also highlighted the disconnect between SpaceX's success and the performance of other space stocks.

“It’s been a great June for space investors, but that was felt only if you held shares of SpaceX and SpaceX only,” Singh said in a Barron's report.

“Over the past year, investors had heavily bought into space…. But over the past month, they’ve been obliterated by investors selling their winners to raise cash in favor of the real deal,” she added.

Neutron rocket remains a key growth catalyst

A major part of KeyBanc's bullish thesis centers on Rocket Lab's expanding position in the commercial launch market.

The firm described Rocket Lab as the second-largest player in the commercial space launch industry behind SpaceX.

Its Electron launch vehicle has completed approximately 90 successful missions.

KeyBanc also expressed confidence in Rocket Lab's Neutron rocket program, which remains on track for its inaugural launch later this year.

According to the firm, additional visibility into the project over the past six months has increased confidence in the program, while a testing anomaly encountered in January has been fully resolved.

Leshok noted that Rocket Lab's combination of launch services, satellite design, and manufacturing capabilities provides strategic flexibility as the commercial space market continues to evolve.

“SpaceX’s premium valuation shows the value of having in-house access to space and the myriad of potential end-use applications that come with that capability. We continue to expect these applications to evolve over time and believe Rocket Lab is among the best positioned to adapt to the dynamic market given its satellite design/manufacturing and launch heritage,” Leshok added.

Strong growth and Nasdaq-100 inclusion support outlook

Investor optimism has also been supported by Rocket Lab's recent financial performance and upcoming inclusion in the Nasdaq-100 index.

The company reported first-quarter revenue of $200.35 million, exceeding analyst expectations of $189.65 million and representing year-over-year growth of 63.4%.

Earnings per share came in at negative $0.07, matching Wall Street forecasts.

Rocket Lab is scheduled to join the Nasdaq-100 on June 22, a move that could generate additional demand from index-tracking funds and exchange-traded products managing hundreds of billions of dollars in assets.

Stifel recently raised its price target on Rocket Lab to $132 from $110 while maintaining a Buy rating, citing strong revenue growth and an expanding contract backlog.