Why Rocket Lab Stock Skyrocketed Last Week

1 hour ago 6

Josh Kohn-Lindquist, The Motley Fool

Sat, July 4, 2026 astatine 2:29 PM CDT 2 min read

Shares of burgeoning abstraction systems and rocket motorboat specializer Rocket Lab (NASDAQ: RKLB) roseate 24% past week arsenic the marketplace welcomed the company's latest acquisition announcement.

On Monday, Rocket Lab announced that it was acquiring outer relation Iridium Communications (NASDAQ: IRDM) for astir $8 billion, successful a woody consisting of a 50-50 premix of currency and RKLB stock. The marketplace is optimistic that the acquisition -- expected not to adjacent until the mediate of 2027 -- volition reenforce Rocket Lab's maturation beyond being a motorboat provider.

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Chief Executive Officer and laminitis Peter Beck calls the woody a "shortcut" for Rocket Lab's ambitions with its abstraction applications. Bringing Iridium's outer prowess connected board, the institution gains entree to spectrum, 66 in-orbit satellites (and 14 spares), and a recurring lawsuit basal of 2.55 cardinal subscribers. While Rocket Lab volition person to thin connected caller indebtedness and shareholder dilution via caller shares to money the deal, Iridium could assistance the combined institution vastly amended its currency flows.

Over the trailing 12 months, Rocket Lab burned $161 cardinal successful currency from operations, whereas Iridium generated $411 million. Provided the woody goes through, this would supply an ample watercourse of currency travel for Rocket Lab to proceed scaling its business. Furthermore, portion the woody isn't "cheap" with Iridium's $8 cardinal terms tag, which values it astatine 26 times escaped currency flow, I similar that Rocket Lab utilized its loftily valued banal for fractional of the funding. Currently trading astatine 82 times income -- compared to Iridium's 6, for examination -- present is arsenic bully a clip arsenic immoderate to connection caller shares.

That said, arsenic overmuch arsenic I similar the deal, Rocket Lab's lofty valuation should service arsenic a reminder for funny investors not to spell "all-in" astatine today's prices. I judge successful Peter Beck's shortcut thesis and judge the vertical integration from the acquisition could wage dividends further down the road. Still, I'm not successful a unreserved to adhd to my shares astatine today's stretched valuation -- particularly aft this week's rise.

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