Shares of Rocket Lab USA fell 12% to $126.27 on Monday, erasing nearly a week of gains even as the company sits on arguably its strongest fundamental footing ever. The selloff came days after RKLB touched $150.23 — capping a run of more than 60% in May alone — and appears driven by traders cashing in rather than any deterioration in the business. The timing is notable: on May 27, Rocket Lab announced it passed System Requirements Review for the Space Development Agency's Tracking Layer Tranche 3 missile-defense constellation , a genuinely positive milestone that the market initially cheered before gravity took over.
A $1.3 Billion Government Backlog Changes the Revenue Mix. Rocket Lab's roughly $816 million Tranche 3 award builds on a previously awarded $515 million contract, bringing total SDA awards past $1.3 billion.
These contracts represent long-duration, government-backed revenue that may diversify the business away from the more cyclical commercial launch market. For shareholders, this is the company steadily converting from a small-rocket launcher into a defense prime contractor with multi-year revenue visibility.
The Stock Ran Far Ahead of Where Analysts Said It Should Be. Cantor Fitzgerald kept its Overweight rating but held its $96 price target — well below the current trading price.
The valuation is demanding at roughly 124 times trailing twelve-month sales , a level that leaves little room for stumbles. When a stock doubles the Street's consensus target, even great news can trigger selling as short-term holders lock in profits.
The Broader Space Sector Is Both Lifting and Destabilizing RKLB. SpaceX's anticipated IPO — rumored at a $1.7 trillion valuation — has sent a wave of capital into space stocks.
Meanwhile, Blue Origin's New Glenn rocket explosion on May 28 is viewed as neutral-to-positive for Rocket Lab, reinforcing its medium-lift prospects. The flip side: sector-wide hype tends to amplify both rallies and corrections.
Building Everything In-House Is the Bet That Matters Most. Rocket Lab's emphasis on vertical integration — manufacturing key hardware and software internally — could give it greater control over costs, timelines, and supply chain reliability on sensitive defense programs.
Q1 2026 revenue jumped 63.5% to $200.3 million, with a record $2.2 billion backlog , suggesting the in-house model is scaling. But national security contracts carry execution risk and milestone-based performance requirements; investors will remain focused on delivery timelines and profit margins as the programs advance.