Rocket Lab stock rose after winning a US government contract

Shares of Rocket Lab (RKLB) jumped in early trading Friday after winning a U.S. government contract that could be worth up to $515 million. The space company will “design, manufacture, deliver and operate 18 spacecraft” as part of the deal. Yahoo Finance Live takes a closer look at the deal.

For more expert insights and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video version

Brad Smith: Rocket Lab is participating in the launch after the aerospace manufacturer struck a $515 million deal here with a US government client to design and operate 18 spacecraft. Under the contract, Rocket Lab will deliver its spacecraft to the customer for a scheduled launch in 2027 and operate the satellites until 2023 here. They said work under the agreement will begin, and as we mentioned, that's scheduled to happen in 2027. And then finally here, the incentives and the options and the $489 million base amount is what's kind of included in the $515 million, kind of the headline deal price. here.

Sina Smith: Yes, definitely, the Street sees that as a catalyst here for stocks in the short term. It also obviously makes sense to play long term as well. City are also very encouraged by this, having won a US government contract worth $515 million. Citi makes the argument that this further weakens the backlog for its space systems business.

We know we were just talking about Rocket Lab last week, and the fact that they were able to successfully launch their first electron rocket. Since their failure in September, we've seen a lot of excitement surrounding that initially. Once again, at the end of the week, we are seeing some excitement in stocks in the wake of this government contract. Obviously, this is a big win for the company and what that could mean for some future deals that may be coming their way.

Brad Smith: I mean, government contracts are huge, especially for any of the companies, whether publicly traded or privately owned, if you will. Look no further than SpaceX, which has been able to ensure that its business receives the necessary amount of revenue to be able to operate based on the government contracts it has been able to see. This eventually led to a kind of frenzied valuation of the atom.

Mythical creatures will be discussed later. But ultimately, for SpaceX and Rocket Labs, and even for some other publicly traded entities, like Lockheed Martin, they've all had to constantly rely on some of these big government contracts. Rocket Lab picks up a little bit here from a US government customer, at least a department, here.