Rocket Lab (RKLB) just landed a US$266 million contract from the U.S. Space Force for 12 suborbital launches, with options for six more through 2028. This gives investors fresh contracted revenue to assess.

The contract news arrives after a choppy stretch for Rocket Lab, with the share price falling 35.55% over the past 30 days and 23.23% over 90 days. However, the 1 year total shareholder return of 47.44% and very large 3 year total shareholder return suggest longer term momentum has been strong, even as recent trading reflects renewed focus on execution risks and valuation.

If you are watching how space stocks are repricing risk and opportunity, it could be a good moment to scan other AI focused infrastructure plays using the 54 AI infrastructure stocks.

For Rocket Lab, a sharp pullback after contract wins and long term gains raises a simple question: are you looking at a business that has changed, or a mood swing in how the stock is priced?

Most Popular Narrative: 18.7% Undervalued

Rocket Lab's most followed valuation narrative pegs fair value at $85.04 per share, compared with the last close at $69.12, framing the stock as discounted on that view.

Rocket Lab is no longer a launch company that happens to make satellite components. It is a vertically integrated space prime that is increasingly valued on its defense backlog and Space Systems franchise. The current $74.68 price already reflects a great deal of optimism, but I believe the 2027–2028 revenue ramp from SDA conversions, combined with margin expansion from vertical integration, supports a fair value of $85.

The fair value call rests on a tight mix of rapid revenue expansion, improving margins and a leveraged defense backlog that kicks in harder later in the decade. Want to see how those moving parts are wired together, and which assumptions about future contracts and profitability really carry this $85.04 figure?

Result: Fair Value of $85.04 (UNDERVALUED)

However, Rocket Lab's fair value story still hinges on two pressure points: Neutron execution risk around its future launch timetable and concentrated exposure to large defense contracts.

Next Steps

If Rocket Lab's mix of contract wins, risks and long term potential feels finely balanced, consider reviewing the data yourself and testing your thesis against the 2 key rewards and 3 important warning signs promptly.

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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.