Rocket Lab (NASDAQ: RKLB) shares have experienced a sharp pullback from their year-to-date peak of $151, retreating to around $84 as of this writing. The decline, which represents a drop of approximately 44%, has persisted even after the company secured a significant $300 million contract from NASA last week. Investors are now weighing whether this sell-off presents a buying opportunity or signals further downside.
NASA Deal and Business Momentum
Rocket Lab was selected by NASA for two key missions: the Polarized Submillimeter Ice-cloud Radiometer (PolSIR) and the Total and Spectral Solar Irradiance Sensor-2 (TSIS-2). The combined contract value of $300 million underscores the agency's confidence in the company's launch capabilities. This follows a broader trend of increasing demand for Rocket Lab's services, as evidenced by its most recent quarterly results.
In its latest earnings report, Rocket Lab posted record revenue of $200 million, a 63.5% increase year-over-year. The company's backlog has swelled to over $2.2 billion, representing more than 70 missions. While the majority of these orders are for its workhorse Electron rocket, the company is seeing growing interest in its HASTE and Neutron platforms. Rocket Lab secured five Neutron launches in the last quarter alone, with the manifest now filling through the end of the decade.
Valuation Concerns Persist
Despite the strong operational performance, valuation remains a key concern. Rocket Lab currently trades at a forward price-to-sales ratio of approximately 53, a level that implies aggressive future growth expectations. Analysts project annual revenue of $915 million for the current fiscal year, up 52% year-over-year, with further growth to $1.29 billion expected next year. However, the high multiple leaves little room for error, and any disappointment in execution could lead to further multiple compression.
The broader space sector has also faced headwinds. SpaceX, which went public earlier this year, has fallen over 30% from its post-IPO highs. Other space stocks, including Planet Labs and Intuitive Machines, have also declined recently, suggesting a sector-wide profit-taking phase.
Technical Analysis: Key Support Levels
From a technical perspective, Rocket Lab stock is testing a critical support zone. The price has settled along an ascending trendline that has connected the lowest swings since November 2024. Importantly, the stock remains above its 200-day exponential moving average (EMA), a level often watched by traders as a gauge of long-term trend strength. The current price also coincides with the Strong, Pivot, Reverse level of the Murrey Math Lines tool.
This confluence of support suggests that a bounce could be imminent. A move back toward the Major S&R level of $100 is plausible if buying interest returns. However, a breakdown below the Strong, Pivot, Reverse level at $75 would invalidate this bullish view and signal further downside risk.
For context, Rocket Lab's recent inclusion in a major blue-chip index initially boosted the stock, but such moves are often followed by a retreat as ETF and mutual fund rebalancing is completed. This pattern may have contributed to the recent weakness.
Investors should also note the broader market environment. While Bitcoin holds above $63K and silver breaks above $62, risk appetite remains mixed. The space sector's performance will likely depend on continued contract wins and execution against the growing backlog.
For those following Rocket Lab, the key levels to watch are the 200-day EMA support and the $75 floor. A successful hold above these levels could set the stage for a recovery toward $100, while a break below would suggest the correction has further to run.
This article is for informational purposes only and does not constitute financial advice.
