An analyst called the sell-off following SpaceX's IPO excessive. Which stocks did he recommend?

KeyBanc Capital Markets believes that SpaceX’s IPO does not undermine the prospects of other space companies, and that the recent sell-off of their shares was excessive. The bank has upgraded its ratings on Firefly Aerospace and Rocket Lab, recommending that investors buy their shares. KeyBanc predicts that interest from major investors and increased government spending on the space industry will support the stock prices of these two companies.

KeyBanc Capital Markets analyst Michael Leshok upgraded his ratings on Firefly and Rocket Lab shares from “Sector Weight” to “Overweight,” which is equivalent to a “buy” recommendation, according to CNBC. The bank set a price target of $50 for Firefly, implying 50% upside potential relative to the close on Monday, June 15. The target price for Rocket Lab shares is $135, implying an increase of approximately 23%.

Following SpaceX’s debut on the Nasdaq, shares of space companies—which had previously been rising on the back of industry hype— plummeted. But the sell-off was unwarranted, according to a KeyBanc analyst. “The macroeconomic factors that have driven the space sector’s growth over the past two years have only accelerated,” he noted in a report cited by MarketWatch.

The space industry is being driven by growing interest from institutional investors, increased government spending, and the expansion of NASA programs, Leszek explains. He noted that the agency’s activities are accelerating at a pace not seen since the Apollo program, while the supply of launch services remains limited—amid rapid growth in the number of satellites and space services.

Rocket Lab and Firefly could benefit from SpaceX’s shift to the Starship rocket, according to an analyst. In his view, Elon Musk’s company will use the new mega-rocket primarily for its own missions, including launching Starlink satellites into orbit, gradually reducing the role of the Falcon 9 rocket. As a result, the mid-class rockets currently under development—Rocket Lab’s Neutron and Firefly’s Eclipse—could gain additional opportunities. Rocket Lab expects to conduct the first Neutron launch by the end of this year, while the debut launch of Firefly’s Eclipse is scheduled for no earlier than 2027, notes MarketWatch.

Leszek believes that U.S. authorities are interested in fostering a pool of major space launch operators rather than being dependent on a single company. He cited NASA programs as an example, in which government contracts are distributed among several players.

KeyBanc’s optimism is generally in line with the Wall Street consensus. According to MarketWatch , seven out of ten analysts tracking Firefly recommend buying the company’s stock. Among the 20 analysts covering Rocket Lab, 15 have assigned it “bullish” ratings.

At the close of trading on June 15, Firefly’s stock rose 4.7%, while Rocket Lab’s stock gained 6.7%. Despite the recent pullback ahead of SpaceX’s IPO, Firefly shares have risen 57% over the past six months, while Rocket Lab shares have gained 85%.

This article was AI-translated and verified by a human editor