Rocket Lab (RKLB) has just expanded its national security work by joining the U.S. Space Force’s NITE-STAR test and training contract and winning new roles on Viasat’s Protected Tactical SATCOM-Global program.

Despite this contract momentum, Rocket Lab’s share price has been under pressure, with a 7 day share price return down 15.47% and a 90 day share price return down 55.46%, even as the 1 year total shareholder return is 39.02%. This suggests long term holders have still seen very strong gains.

If you are comparing Rocket Lab with other space and defense related plays, it can help to scan for adjacent enablers of space and AI infrastructure such as 38 power grid technology and infrastructure stocks

Bulls point to Rocket Lab’s growing government backlog and improving cash burn, while bears focus on ongoing losses and recent equity dilution. Which side looks more convincing once you compare those facts with today’s share price?

Most Popular Narrative: 21.3% Undervalued

According to the most followed Rocket Lab narrative, a fair value of $85.04 sits well above the last close at $66.91, which frames the current pullback as a discount rather than a warning sign.

Rocket Lab is mid transformation from a small launch specialist into a vertically integrated space and defense prime, with Space Systems now ~67% of revenue and growing fastest.

A $1.85B backlog (+73% YoY) anchored by the $816M SDA Tranche 3 award provides multi-year revenue visibility that the current trailing P/S of ~72x does not yet fully reflect.

The fair value story leans heavily on accelerating revenue, rising margins and a bigger share of defense work. One piece of that financial puzzle carries most of the weight. The rest is about how long the current contract pipeline can support that trajectory.

Result: Fair Value of $85.04 (UNDERVALUED)

However, Rocket Lab’s fair value story hinges on smooth execution of Neutron and timely conversion of its government backlog, and setbacks on either front could quickly challenge this 21.3% undervalued narrative.

Another View On Rocket Lab's Valuation

The fair value narrative around Rocket Lab leans heavily on growth and contract visibility, but a second lens tells a slightly different story. Our DCF model points to a future cash flow value of $117.32 per share, which is well above the current $66.91 price and indicates a larger potential undervaluation. Which framework do you find more convincing when risk and execution hurdles are factored in?

Next Steps

Given the mix of optimism and concern around Rocket Lab, it makes sense to stress test the data yourself and move quickly while sentiment is divided. To balance both sides of the story, start with the 2 key rewards and 3 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.