The U.S. Space Development Agency (SDA) recently awarded Rocket Lab (RKLB 5.95%) an $816 million contract to design and manufacture 18 satellites for a missile-defense satellite constellation. That award, which represents Rocket Lab's largest single contract to date, could drive its high-flying stock to new heights this year.
What does Rocket Lab do?
Rocket Lab mainly develops reusable orbital rockets. It's already launched its flagship Electron rocket, which can carry small payloads of up to 300 kilograms into low Earth orbit, 81 times to date, deploying more than 248 satellites. It launched 6 rockets in 2021, 9 in 2022, 10 in 2023, 16 in 2024, and 21 in 2025.
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It plans to launch its second rocket, the Neutron, this year. That new rocket can carry larger payloads of up to 13,000 kilograms and compete more effectively against SpaceX's Falcon 9 and Falcon Heavy rockets, which can carry payloads of 22,800 kg and 63,800 kg, respectively.
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Why could the SDA contract be a game changer?
Over the long term, Rocket Lab aspires to become an "end-to-end" space company that doesn't simply launch reusable rockets. It's expanding its Photon satellite bus platform, which kicks satellites into their correct orbits; offering more "ride-sharing" services to deliver additional payloads to space, and expanding its higher-margin Space Systems segment, which produces spacecraft, satellites, and subsystems for other companies and government agencies. It also recently acquired Mynaric, a leading laser communications provider, to accelerate that strategy.
Therefore, securing a new $816 million contract to produce a constellation of defense satellites would certainly diversify its top line away from its core launch services. It expects to deliver its final satellite by the end of 2029. If we split that total contract value by four, we would add roughly $200 million to its annual revenue over the next four years. That would be equivalent to about a third of its projected 2025 revenue.
For now, analysts expect Rocket Lab to more than double its revenue from $600 million in 2025 to $1.29 billion in 2027. They also expect it to turn profitable by the final year. With a market cap of $42.8 billion, it might seem expensive at 33 times its 2027 sales. However, it could deserve that premium valuation -- especially if it secures more massive government contracts and successfully expands into a "one-stop shop" for space transportation services.
