Rocket Lab plunges 25% as space stocks face sector-wide selloff

Rocket Lab's 25% weekly decline led a rout in space stocks as investors rotated out of the sector following SpaceX's IPO and weighed the risk of higher interest rates on growth valuations.

Rocket Lab Ltd. fell 25.3% this week as investors rotated out of space stocks and weighed the risk of higher interest rates on growth valuations.

The selloff came despite no negative company-specific news. Rocket Lab on Monday completed the deployment of the Pioneer spacecraft for the U.S. Space Force's Victus Haze mission within 17 hours of receiving the order, setting a record for space-mission response time, the company said in a press release.

The broader space sector suffered similar losses. AST SpaceMobile lost more than 15% over the past five trading sessions and 39% over the past month, while SpaceX, which went public earlier this month, fell nearly 16% from its post-IPO high. Over the same period, the S&P 500 dropped 2% and the Nasdaq Composite declined 4.6%.

The pullback leaves Rocket Lab 44% below the lifetime high it reached earlier this year. Investors now face the question of whether the sector's valuation reset has further to run, with the next event being the Federal Reserve's July rate decision and the company's upcoming quarterly results.

Rocket Lab's decline was part of a broader rotation out of growth stocks as traders repriced the probability of Fed rate hikes. The company's beta of 2.70 means it is nearly three times more volatile than the S&P 500, amplifying its losses during sector-wide selloffs. The CBOE Volatility Index rose as the shift in risk appetite accelerated.

The company continued to make operational progress despite the stock's decline. Beyond the Victus Haze mission, Rocket Lab announced Thursday it had won a contract with NASA for three Electron rocket launches supporting the space organization's PoISIR and TSIS-2 missions early next year. The news triggered a late-week rally in the stock, though it was insufficient to offset the broader weekly losses.

SpaceX's public debut earlier this month reshuffled investor positioning across the space economy. As retail and institutional investors allocated capital to the newly public industry leader, smaller operators such as Rocket Lab and AST SpaceMobile saw their shares sold off. AST SpaceMobile's stock has lost 45% from its year-to-date high set on May 28, with the company's $1 billion convertible senior note offering in February adding to investor concerns about capital intensity.

The rotation has been compounded by insider selling in some space names. AST SpaceMobile insiders have sold more than $451 million in shares over the past 12 months, according to company filings, while Rocket Lab has not reported similar insider activity. Analyst ratings for the space sector have also turned cautious, with Weiss Ratings reaffirming a Sell rating on AST SpaceMobile in March and Wall Street Zen downgrading the stock to Strong Sell in April.

For Rocket Lab, the operational milestones provide a counterweight to the stock's decline. The company's ability to execute on government contracts and maintain its launch cadence will be key to restoring investor confidence. The next major test comes when the company reports its quarterly results, which will show whether revenue growth can keep pace with the market's expectations.

This article is for informational purposes only and does not constitute investment advice.