Rocket Lab Corporation RKLB shares have declined 33% over the past three months, underperforming the Zacks Aerospace-Defense Equipment industry’s growth of 1.7%. The company faces risks from government spending shifts, intense competition and supply-chain disruptions, which could pressure revenue growth, margins and overall performance.
Image Source: Zacks Investment Research
Meanwhile, stocks like Leonardo DRS, Inc. DRS and TransDigm Group Inc. TDG have outperformed the industry during the same period. Shares of DRS and TDG have risen 5.1% and 2.7%, respectively.
With RKLB shares falling over the past three months, investors may be reassessing the stock’s outlook. Let's examine the factors and assess the stock's investment prospects to make an informed decision.
Potential Risks to Rocket Lab’s Growth
Rocket Lab remains vulnerable to changes in government spending and customer concentration, as a meaningful portion of its business is tied to U.S. government and defense programs, while a limited number of customers account for a substantial share of revenues. Shifts in government priorities, budget allocations, procurement schedules or contract funding could affect demand for the company's launch and space systems offerings. The loss, delay or cancellation of a major customer program could reduce revenues, backlog and future business visibility.
Rocket Lab operates in a competitive and capital-intensive space industry requiring continued investment in launch vehicles, spacecraft, manufacturing capacity and infrastructure. Competition from established aerospace contractors and emerging launch providers could intensify pressure on pricing and market share, while ongoing investments in technologies such as Neutron could increase costs and weigh on profitability.
Rocket Lab also faces supply-chain risks, as certain raw materials, components, subsystems and services are sourced from sole-source suppliers. Disruptions, shortages, quality issues or longer lead times could increase costs, delay customer deliveries and affect operating performance as the company scales its launch and space systems businesses.
Key Growth Drivers of Rocket Lab
Rocket Lab is strengthening its position in space-based defense through a major satellite and launch award. In August 2026, the company received a $397 million U.S. Space Force contract to develop, build and launch multiple Flatellites for the Space-Based Airborne Moving Target Indicator program. The award highlights Rocket Lab's vertically integrated capabilities and expands its role in high-value national security space programs.
The company also delivered strong second-quarter results, with record revenues of $234.1 million, up 62% year over year, while the backlog reached a record $2.36 billion. Rocket Lab also guided for record revenues in the third quarter, highlighting continued momentum across its launch and space systems businesses.
Earnings Estimates for RKLB Stock
The Zacks Consensus Estimate for RKLB’s 2026 earnings per share (EPS) indicates a rise of 16.67% over the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Leonardo DRS’ 2026 EPS calls for a jump of 5.38% in the past 60 days. The estimate for TransDigm Group’s fiscal 2026 EPS implies a decline of 0.40% over the same period.
RKLB Stock’s Poor ROIC
The image below shows that RKLB stock’s trailing 12-month return on invested capital (ROIC) not only lags the peer group’s average return but also reflects a negative figure. This suggests that the company's investments are not yielding sufficient returns to cover its expenses.
Image Source: Zacks Investment Research
Liquidity Position of RKLB
RKLB has a current ratio of 4.48 compared with its industry’s average of 2.36. The ratio, being more than one, indicates that RKLB possesses sufficient capital to pay off its short-term debt obligations.
Image Source: Zacks Investment Research
Its industry peers, Leonardo DRS and TransDigm Group, also maintain current ratios above one. DRS has a current ratio of 1.92, while TDG holds 3.02.
RKLB Stock Trades at a Premium
Rocket Lab is currently trading at 41.3X, a premium compared to its industry’s 8.55X on a forward 12-month Price/Sales basis.
Image Source: Zacks Investment Research
What Should an Investor Do?
Despite benefiting from major government contract awards and expanding defense opportunities, Rocket Lab continues to face risks related to government spending, customer concentration, intense competition and supply-chain disruptions. The stock has declined in recent months and continues to trade at a significant premium to its industry, while its negative ROIC indicates that investments have not yet generated sufficient returns to cover expenses. Given these factors, investors may consider avoiding the stock at current levels.
RKLB currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Rocket Lab Corporation (RKLB): Free Stock Analysis Report
Transdigm Group Incorporated (TDG): Free Stock Analysis Report
Leonardo DRS, Inc. (DRS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).