Rocket Lab, Firefly and Redwire Soared — Now the SpaceX IPO Could Bring Them Back to Earth

TLDR

• Redwire shares dropped nearly 15% after Jefferies downgraded the stock to Hold following a 163% gain in one month
• Rocket Lab fell over 13% on Monday as the broader space sector sold off
• The upcoming SpaceX IPO, expected in June, is seen as a potential “sell the news” catalyst for space stocks
• Valuations across the sector are stretched, with AST trading at 260 times estimated 2026 sales
• Rocket Lab’s RSI hit 80 and its Stochastic Oscillator moved above 90, signaling the stock is overbought

Space stocks pulled back on Monday, led by sharp declines in Rocket Lab, Redwire, and Firefly Aerospace. The selloff came as investors weighed sky-high valuations against the approaching SpaceX IPO.

Redwire fell nearly 15% after Jefferies analyst Sheila Kahyaoglu downgraded the stock from Buy to Hold. She raised her price target to $24 from $13 but said she sees limited upside from current levels. The stock had already surged 163% in the past month.

Rocket Lab dropped more than 13% in the same session. The stock has climbed over 4,000% from its pandemic low and recently hit an all-time high, but technical indicators are flashing warning signs.

Rocket Lab USA, Inc., RKLB

Overbought Signals Flash Across the Sector

Rocket Lab’s Relative Strength Index reached 80, a level that often signals a stock is overbought. The Stochastic Oscillator moved above 90 as well. The stock is trading at $143, well above its 50-week moving average of $68 and its 100-day moving average of $50.

Analysts say a mean reversion to the $100 support level is possible if selling continues. That level marked the stock’s peak in January of this year.

Firefly Aerospace fell around 12%, and AST SpaceMobile dropped roughly 9% on Monday. Intuitive Machines also declined. All four stocks had averaged a 59% gain in April alone.

The Procure Space ETF was more than 20% above its 50-day moving average heading into Monday. A drop to that level would represent a meaningful pullback for the fund.

SpaceX IPO Could Trigger a Sell-the-News Event

The SpaceX IPO is expected in June and could value Elon Musk’s company at over $2 trillion. Traders on Polymarket expect the valuation to hit that level on the first day of trading. It would be the largest IPO on record.

Space stocks have been rising in anticipation of the event. But analysts warn this dynamic could quickly reverse once the IPO actually happens. A sell-the-news reaction is a well-known pattern where investors buy ahead of a major event and sell when it arrives.

Valuations across the sector are high. AST trades at 260 times estimated 2026 sales. Rocket Lab trades at 91 times sales, up from under 20 times a year ago. Redwire trades at nearly 9 times sales, up from 3 times.

Rocket Lab does have a strong operational story. The company reported a 43% revenue increase to $200 million last quarter and holds a $2.2 billion backlog. It also passed a System Requirements Review for the Space Development Agency’s Tracking Layer Tranche 3 constellation under an $816 million contract, bringing total SDA-related awards to over $1.3 billion.

Still, the company posted a $40 million loss last quarter and carries a forward price-to-sales ratio of 48. Profitability remains a future target, not a current reality.

The space sector remains one of the most closely watched areas of the market heading into June, with the SpaceX IPO expected to set the tone for what comes next.

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