Rocket Lab USA: A Rising Star in the Mid-Cap Defense Sector?

Rocket Lab USA (NASDAQ: RKLB) has surged into the spotlight as a key player in the defense sector, driven by its inclusion in high-profile government contracts and a dramatic rise in valuation. Analysts are now weighing whether the company’s momentum in aerospace and hypersonic technology positions it among the best mid-cap defense stocks to buy. Here’s what investors need to know.

Market Cap Growth: From $2.46B to $13.7B in 12 Months

Rocket Lab’s market capitalization has exploded from $2.46 billion in June 2024 to $13.70 billion by early 2025, fueled by a 537% year-over-year stock surge. While this places it in the large-cap category (typically defined as $10B+), analysts still rank it 7th among the top 10 mid-cap defense stocks based on its 20.5% upside potential and strategic positioning in government programs. This anomaly highlights how Rocket Lab’s growth trajectory and niche expertise in hypersonic testing and national security launches make it a standout mid-cap bet, even with a large-cap valuation.

Defense Sector Inclusion: Billions in Contracts, Strategic Partnerships

Rocket Lab’s recent wins in defense programs underscore its rising influence:
- Hypersonic Programs: Selected for the U.S. Air Force’s $46 billion EWAAC contract and the U.K.’s $1.3 billion HTCDF initiative, totaling $47.3 billion in potential revenue through 2031.
- National Security Missions: Competing for the $5.6 billion NSSL Phase 3 Lane 1 contract (U.S. Space Force) and part of a $1.45 billion Kratos-led hypersonic test program.
- Proven Track Record: Its HASTE launch vehicle has executed three U.S. Department of Defense missions, including two launches within 21 days from Launch Complex 2.

Analyst Ratings: Bullish Consensus, But at What Price?

Analysts are overwhelmingly bullish, though targets vary:
- Stifel: Maintains a Buy rating with a $27 price target, citing Rocket Lab’s strategic hypersonic programs and vertical integration advantages.
- Cantor Fitzgerald: Overweight rating and $24 target, emphasizing its proprietary launch infrastructure.
- Wall Street Consensus: Moderate Buy with an average $22.72 target, implying 14% upside from recent prices.

Institutional support has grown sharply: 37 hedge funds held stakes in Q4 2024, up from 16 in Q3, reflecting investor confidence in its defense pivot.

Financial Performance: Revenue Growth vs. Net Losses

Rocket Lab’s Q1 2025 revenue surged 121% YoY to $132 million, driven by government contracts and launch services. However, it reported a net loss of $52.34 million, highlighting the high R&D costs required to develop its Neutron medium-lift rocket and hypersonic capabilities.

Risks and Challenges

• Execution Risks: Delays in Neutron’s development or hypersonic testing could dent investor confidence.
• Budget Uncertainties: Proposed cuts to NASA’s budget and global geopolitical shifts could impact defense spending.
• Valuation Concerns: Short interest rose to 16.95% as of March 2025, signaling skepticism about its $13.7B valuation relative to profits.

Conclusion: A High-Reward, High-Risk Bet on Defense Tech

Rocket Lab’s inclusion in $53 billion+ defense contracts, its HASTE rocket’s proven reliability, and analyst consensus suggest it could remain a top mid-cap defense stock. While its large-cap valuation and net losses raise red flags, the company’s strategic role in hypersonic testing and national security launches positions it to capitalize on $1 trillion+ global defense spending growth.

Investors should monitor May 8’s earnings report for updates on Neutron’s progress and Q2 revenue trends. For those willing to bet on Rocket Lab’s long-term potential in a booming defense sector, the stock’s 14–25% upside (per analyst targets) makes it a compelling—if volatile—opportunity.

In short, Rocket Lab isn’t just a mid-cap stock; it’s a pioneer in hypersonic innovation, backed by analyst enthusiasm and institutional inflows. The question remains: Can it convert contracts into profits before valuation skeptics win the debate?