Rocket Lab's Sell-Off Is Fading—Is It Finally Safe to Buy?

Rocket Lab shares have fallen more than 50% from their May peak amid a sector-wide rotation following the SpaceX IPO, though selling pressure appears to be easing. The company reported record quarterly revenue and a backlog surpassing $2.3 billion, while continuing to win major defense contracts including NITE-STAR and Flatellite awards. Analysts maintain a Moderate Buy consensus with a $110.65 average price target, though the stock's high valuation and delayed Neutron rocket debut keep it volatile.

Rocket Lab NASDAQ: RKLB has been a difficult stock to own. After peaking at $151 in May, the shares were swept up in the brutal rotation that followed the SpaceX NASDAQ: SPCX IPO, giving back more than half their value as investors fled the space sector. But that wave of selling now appears to be losing its force. With Q2 earnings behind the company, a fresh batch of contract wins rolling in, and the post-IPO panic easing, the question worth asking is whether the coast is finally clearing.

The Aug. 10 earnings report removed one major source of uncertainty. Rocket Lab delivered record quarterly revenue and a record backlog that has now surpassed $2.3 billion, alongside more than $1 billion in new contracts signed over the quarter. The market's initial reaction was lukewarm, with shares dipping on softer Q3 margin guidance tied to heavy Neutron spending. But with the print now digested, investors can shift their focus from the quarter that was to the catalysts ahead.

If there is one thing that has not slowed during the share-price slump, it is Rocket Lab's ability to win business. Just in the past week, the company was onboarded to the U.S. Space Force's NITE-STAR program, a training and wargames architecture effort carrying a ceiling of up to $981 million across its participants. It also captured a geostationary satellite bus role from Viasat for a protected military communications system and secured a separate award tied to the Space Force's Space Data Network. Those follow the $397 million Flatellite contract and the record $266 million missile-defense launch deal announced earlier in August. The pattern is unmistakable. Rocket Lab is steadily transforming itself into a genuine national security contractor, with a defense backlog that keeps compounding regardless of what the stock price is doing on any given day.

Here is the tension every prospective buyer has to weigh. Despite the relentless flow of contract announcements over the past several months, the stock has repeatedly sold off or gone sideways on the news. That disconnect comes down to two things: valuation and Neutron. Even after its steep decline, Rocket Lab trades at more than 70 times trailing sales, an extraordinary multiple for a company that remains unprofitable, with a trailing net loss near $198 million. The market is essentially demanding proof before it pays up again.

And of course, that proof is Neutron. The rocket that opens the door to a much bigger addressable market, and the vehicle meant to launch programs like the Flatellite constellation, has slipped to a fourth-quarter debut after a Stage 1 tank issue. Until Neutron actually flies, a portion of the bull case remains theoretical, and the stock is likely to stay volatile.

"Safe" is probably the wrong word for a stock with a beta of 2.6 that can sw...