The space industry is attracting renewed investor focus as rising government spending and broader commercial demand push several strategic players into sharper view. In its latest research, Morgan Stanley identified two companies it believes are particularly well positioned to capture growth in the sector: Rocket Lab (RKLB) and MDA Space (MDA).
The bank's analysis emphasized execution, contract momentum and market positioning as the core reasons behind its recommendations. Morgan Stanley argued that expanding defense and commercial program awards, combined with firms increasing their operational scale, create a longer-term growth runway for a subset of companies within the industry.
Rocket Lab (RKLB)
Morgan Stanley upgraded Rocket Lab from Equal-weight to Overweight, raising its price target to $105 from $67. The research note pointed to several operational and strategic indicators that underpin the upgrade: consistent launch execution, an apparent path to competing in the medium-lift segment where capacity is constrained, and widening relevance across both commercial and government markets.
The bank highlighted Rocket Lab's ability to win defense business as evidence of its competitiveness. A notable example is the firm's $816 million award for the Space Development Agency's Tranche 3 Tracking Layer, which Morgan Stanley says shows Rocket Lab can contend with established defense primes for substantial government work.
Analysts also noted that Rocket Lab appears to be following a similar trajectory to larger launch providers by scaling lift capacity, pursuing booster reusability and developing constellation-related capabilities. Recent operational milestones cited by market observers include Rocket Lab's first launch of 2026, which deployed two satellites for Open Cosmos.
Independent broker Baird also raised its outlook for Rocket Lab, increasing its price target to $100 after a separate, substantial contract win valued at more than $1 billion from the PWSA. Together, these developments informed Morgan Stanley's more constructive stance on the stock.
MDA Space (MDA)
MDA Space received an identical upgrade in Morgan Stanley's coverage, moving from Equal-weight to Overweight while seeing its price target lifted to $46 from $32. The adjustment implies roughly 45% upside from the bank's base price point.
While MDA experienced pressure following the cancellation of EchoStar's D2D constellation in late Q3 2025, Morgan Stanley sees a catalyst pathway in 2026 that could reduce investor skepticism about the company's prospects in future constellation programs. The firm noted that MDA currently trades at a sizable valuation discount - approximately 67% lower than peers on next-twelve-months EV/sales metrics.
Two features of MDA's profile were emphasized as differentiators. First, it is described as a profitable, space-focused pure-play with strong revenue visibility, quantified at roughly 2.5x sales coverage. Second, management is bringing new high-volume manufacturing capacity online this year, which Morgan Stanley suggested could provide additional upside if large commercial awards materialize.
On the contract front, MDA announced a win from the U.S. Missile Defense Agency for the SHIELD program, positioning the company to bid on additional defense tasks. It also secured a $44.7 million contract from the Canadian government to provide components for a new radar imaging satellite.
Sector implications
In aggregate, Morgan Stanley framed these moves as evidence that select space companies are capitalizing on a dual tailwind: stronger government program budgets and expanding commercial applications. For investors, the bank's upgrades reflect confidence that execution and scale can translate to meaningful returns where companies secure sizable, multi-year contract streams.
Key points
- Morgan Stanley upgraded Rocket Lab and MDA Space to Overweight, citing contract wins and operational progress as drivers.
- Rocket Lab's re-rating is supported by proven launch execution, an $816 million SDA Tranche 3 Tracking Layer award, and moves into medium-lift and reusable booster capabilities.
- MDA Space trades at a notable EV/sales discount to peers, is profitable with about 2.5x sales coverage, and is bringing high-volume manufacturing online while winning defense and government contracts.
Risks and uncertainties
- Program cancellations and delays - exemplified by EchoStar's D2D constellation cancellation in late Q3 2025 - can depress demand and investor sentiment in the commercial constellation segment.
- Valuation divergence across the sector - MDA's roughly 67% discount on next-twelve-months EV/sales indicates market skepticism that could persist absent new commercial awards.
- Reliance on large government contracts - both firms' trajectories depend in part on winning and executing sizable, multi-year government programs, which can be competitive and subject to program risk.
As the space sector evolves, Morgan Stanley's view is that companies combining execution with the ability to secure and scale on defense and commercial contracts are best positioned to benefit from the industry's expanding addressable market.