Rocket Lab Corp. (RKLB) had a good run. For more than 18 months, analysts left the stock alone, content to let it climb. That streak ended Thursday when KeyBanc Capital Markets downgraded RKLB from Overweight to Sector Weight.

Here's the thing: KeyBanc still likes Rocket Lab. They consider it a high-quality leader in the space sector. But when a stock surges 280% year over year and hits above $92 in January, eventually someone has to ask whether all the good news is already baked into the price.

The Success Problem

The downgrade isn't about Rocket Lab stumbling. It's about the company succeeding so visibly that everyone already knows about it. Consider what's happened recently:

Contract wins: Rocket Lab landed an $816 million contract from the Space Development Agency for Tranche 3 back in December, nearly doubling its backlog in one swoop.

Infrastructure expansion: The company opened its LC-3 launch pad in Virginia and ramped up production of the Archimedes engine, which is now estimated to be over 90% complete for qualification.

Political tailwinds: A December 2025 executive order on American Space Superiority and Jared Isaacman's appointment as NASA Administrator have shifted momentum toward commercial space companies and away from legacy defense contractors.

All of that is great news. The problem is that everyone knows it's great news, and the stock price reflects it.

Valuation Altitude

RKLB currently trades at approximately 42x its estimated 2027 sales. That's notably steeper than the 20-30x price-to-sales range SpaceX maintained during its early growth stages.

KeyBanc pointed to another factor inflating space sector valuations: rumors of a $1.5 trillion SpaceX IPO sparked a sector-wide re-rating that lifted Rocket Lab along with it.

What Could Change the Outlook

The big uncertainty remains the Neutron rocket, Rocket Lab's next-generation launch vehicle. The debut launch has been pushed to Q1 or later, and analysts want a firm date before feeling confident about the timeline.

KeyBanc indicated they could warm up to the stock again if any of these happen:

• A fully successful first launch of the Neutron rocket.
• Additional large-scale contracts that meaningfully expand the backlog.
• Greater clarity on a potential long-term satellite constellation or services business model.

Price Action: Rocket Lab shares initially dropped following the downgrade but had recovered somewhat to trade 2.95% lower at $89.09 at the time of publication Thursday.