Rocket Lab Stock Faces Profit-Taking Following Historic Defense Contract

Shares of Rocket Lab USA experienced a notable pullback at the end of the week, shedding over 8% on Friday as investors locked in gains. This move followed a significant rally driven by the company securing the largest commercial contract in its history—an $816 million agreement with a U.S. defense agency. Despite the short-term correction, analysts agree this landmark deal substantially alters the fundamental outlook for the space launch specialist.

The catalyst for the recent volatility is a major award from the U.S. Space Development Agency (SDA). Rocket Lab has been selected to participate in the "Tracking Layer Tranche 3" program, a strategic initiative to deploy a network of interconnected satellites in low Earth orbit for missile defense. This placement puts the company alongside established defense contractors such as Lockheed Martin and Northrop Grumman.

The contract's base value is $806 million for the delivery of 18 satellites, with provisions that could expand its total value to approximately $1 billion. The scale of this award is transformative for Rocket Lab's order backlog. Prior to this deal, the company's backlog stood at $1.1 billion as of the end of Q3 2025; this single contract nearly doubles that figure.

Wall Street Revises Targets Upward

In response to the improved business prospects, several equity research firms have lifted their price targets for Rocket Lab stock in recent days:
* Needham: Increased its target to $90 from $63.
* Stifel: Raised its target to $85, up from $75.
* Bank of America: Lifted its price objective to $60.

Should investors sell immediately? Or is it worth buying Rocket Lab USA?

Concurrently, institutional investment activity shows growing confidence. Regulatory filings reveal that BlackRock expanded its stake by 38%, while Swedbank AB purchased shares worth over $22 million during the third quarter.

Strong Operations Contrast with Insider Sales

The company's operational performance remains robust. In 2025, Rocket Lab's Electron rocket achieved a 100% success rate across 21 launch missions. However, this strength is juxtaposed against substantial insider selling activity. CEO Peter Beck and other company insiders have capitalized on the stock's powerful rally in recent months. In the last quarter alone, insiders disposed of shares valued at roughly $151.8 million.

From a technical perspective, the equity appears extended after climbing more than 180% since the start of the year. The Relative Strength Index (RSI) reading of 85.1 indicates deeply overbought conditions, which helps explain Friday's sharp correction to $70.65.

Market attention now turns to the first quarter of 2026, when Rocket Lab's next-generation Neutron rocket is scheduled to arrive at the launch pad. This project is viewed as a critical future growth driver, with a projected mission cost of around $55 million—a significant step up from the Electron's $9 million price tag—potentially unlocking substantial revenue growth and margin expansion.