Rocket Lab Stock Fell Nearly 50% From Its Record High. History Says Do This Next.

Rocket Lab (NASDAQ: RKLB), a developer of reusable orbital rockets, went public through a merger with a special-purpose acquisition company (SPAC) on Aug. 25, 2021. It started trading at $11.58 per share, and closed at a record high of $150.23 on May 27, 2026.

But as of this writing, it trades at about $80. Let's see what caused that near-50% decline, and what history suggests could happen after its stock finally bottoms out.

Image source: Getty Images.

How fast is Rocket Lab growing?

Rocket Lab generates most of its revenue from its Electron orbital rocket, which it has successfully launched 92 times to deploy more than 263 satellites. Its major customers include NASA, the U.S. Space Force, and the Swedish National Space Agency.

The Electron carries smaller payloads than SpaceX's (NASDAQ: SPCX) Falcon rockets, but Rocket Lab plans to launch its higher-capacity Neutron rocket by the end of this year. It also aspires to become an "end-to-end" space services company by expanding its Photon satellite bus platform, which boosts satellites into their intended orbits, and manufacturing more spacecraft, satellites, and subsystems for companies and government agencies.

From 2025 to 2028, analysts expect Rocket Lab's revenue to grow at a 41% CAGR as it launches more rockets and expands into adjacent markets. They also expect its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to turn positive in 2027 and more than double in 2028.

Why did Rocket Lab's stock pull back?

But with an enterprise value of $48.6 billion, Rocket Lab's stock already trades at 53 times this year's sales. At its peak, it was valued at $82.3 billion, or 89 times this year's sales. That bubbly valuation set it for a steep pullback after SpaceX's IPO on June 12 sucked all of the oxygen out of the space sector. In addition to pulling capital away from smaller space stocks like Rocket Lab, SpaceX's market debut posed a clear competitive threat to those smaller fish.

Rocket Lab's Electron and Neutron rockets don't directly compete against SpaceX's Falcon rockets. Yet SpaceX's upcoming Starship -- its largest rocket ever -- could curb the demand for smaller payload rockets and reduce its launch prices. That pressure is likely making investors wary of analysts' rosy estimates for Rocket Lab, and fears of higher interest rate hikes are further compressing its valuations. That's why its stock dropped from its record high.

What does history suggest could happen next?

Past performance is never a reliable indicator of future gains or losses. Still, we can look at its prior valuations to see whether it's cheap or expensive relative to its growth rate. That last time Rocket Lab traded at about 50 times its current-year sales was in mid-January. But its stock sank over the following two months, reducing that ratio to around 30 by the end of March.

Therefore, Rocket Lab's stock could easily decline by another 50% over the next few months before it stabilizes and bounces back. With SpaceX now casting a long shadow over the entire space economy sector, it could be even tougher for Rocket Lab to impress the bulls.

Over the next few years, Rocket Lab will likely acquire more companies, introduce new rocket technologies, and produce more satellites to widen its moat against SpaceX. But those strategies could reduce its cash flow, increase its debt, widen its net losses, and force it to issue even more shares to stay solvent.

That might be why Rocket Lab's insiders sold nearly three times as many shares as they bought over the past 12 months. Its stock might look interesting after its near-three-month pullback, but I wouldn't touch it until it sinks to even cheaper levels.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.