Morgan Stanley Maintains Overweight on Rocket Lab; Iridium Acquisition Opens Valuation Upside
Alina Collins
Morgan Stanley keeps Rocket Lab at Overweight with a bull-case target hiked to $293, arguing the Iridium acquisition completes a launch-satellite-telecom vertical stack and delivers a 4.8x bull-bear payoff ratio.
Why spend $7.5 billion on Iridium?
Iridium owns scarce global L-band spectrum, 66 operational satellites, and 2.5 million government and enterprise subscribers — generating nearly $872 million in 2025 revenue at an EBITDA margin of 57%.
This means → Rocket Lab is buying ready-made cash flow and a fully built LEO constellation, skipping years of construction time and billions in capex.
The deal values Iridium at $54 per share, a 24.1% premium, paid half in cash and half in stock.
Is this the same race as Starlink?
No. Iridium provides low-bandwidth, high-reliability mission-critical comms for governments and enterprises. Starlink delivers mass-market broadband. The two overlap only slightly in direct-to-phone services.
In plain terms = Iridium keeps militaries and corporations connected when everything else goes down; Starlink keeps consumers streaming — different customers, different use cases.
Morgan Stanley argues that combining launch, satellite manufacturing, and satellite telecom makes Rocket Lab a formal replica of SpaceX's vertical-integration model — and the second core player in the global space sector.
How big is the gap with SpaceX?
The size gap is stark: Rocket Lab's market cap sits at roughly $62.3 billion, just 2.8% of SpaceX's ~$2.23 trillion. Its 2026 expected revenue of $923 million is only 2.1% of SpaceX's.
On cost, SpaceX's reusable Starship targets a 2030 payload cost of just $515/kg; Rocket Lab's Neutron — a medium-lift reusable rocket still in development — comes in around $1,731/kg.
This reflects a key point: the investment case for Rocket Lab is not "it has caught up" but "its growth elasticity far exceeds the leader's" — the valuation bets on the slope, not the level.
How fast is it actually growing?
Morgan Stanley projects Rocket Lab's overall revenue CAGR at 45% from 2025 to 2028, with the launch segment growing at 57% — well above SpaceX's 22% launch growth.
Launch-segment gross profit CAGR hits 69%, versus just 15% for SpaceX. This means → starting from a much smaller base, Rocket Lab's profit leverage is multiples of the leader's.
On the product side, the small-lift Electron rocket is already operational. The medium-lift, reusable Neutron — designed to compete with SpaceX's Falcon family — targets a 2027 first flight, with 2030 goals of 50 Electron and 18 Neutron launches per year.
When does it start making money?
Rocket Lab runs losses through 2025–2027. Adjusted EBITDA turns positive in 2027; net income and free cash flow both flip positive in 2028.
In plain terms = investors face at least two more years of cash burn before real profitability — until then, the thesis runs on growth narrative and integration expectations.
What do the three scenarios imply?
Bull case — $293: assumes Neutron development goes smoothly and Iridium's value is fully unlocked; Rocket Lab captures 10% of SpaceX's space-segment valuation, implying upside of over 250%.
Base case — $105: a 30% discount to SpaceX's valuation, implying roughly 26% upside.
Bear case — $40: Neutron delays, frequent launch failures, and 2030 revenue reaching only 60% of the bull case — implying a drop of more than 52%.
Is Rocket Lab worth buying now?
BULL
Vertical integration achieved
Post-Iridium, three business lines merge into one — replicating SpaceX's model as the global No. 2.
Growth elasticity dwarfs the leader
Revenue CAGR 45%, launch-profit CAGR 69% — multiples of SpaceX's pace.
4.8x bull-bear ratio
Bull case offers 250%+ upside; bear case implies 52% downside — odds skew long.
BEAR
Neutron execution risk
The medium-lift rocket hasn't flown yet; any delay hits the core valuation thesis directly.
Profitability is still years away
Positive earnings not until 2028 — sustained cash burn tests market patience.
Deal-completion uncertainty
Third-party bids could kill the Iridium deal; spectrum regulation changes could erode the asset's value.
In plain terms = the payoff ratio Morgan Stanley lays out is compelling, but it only works if Neutron flies on time and Iridium integrates cleanly — either one failing invalidates the bull case.
Content is for reference only, not financial advice.