Goldman Sachs Group, Inc.: Bullish on the aerospace sector's "disruptive" opportunities, Rocket Lab (RKLB.US) sets a new record for government orders, with a target price of $47.

Goldman Sachs Group, Inc. has released an in-depth research report on the aerospace sector, focusing on the "Propulsion Warfare Space Architecture" (PWSA) project led by the U.S. Department of Defense's Space Development Agency (SDA), particularly analyzing the award of contracts for its third batch of tracking layer satellites. The report highlights that on December 19, 2025, SDA announced the contract for the third batch of tracking layer satellites for the PWSA project, with a total value of up to $3.5 billion covering the construction and launch of 72 satellites, expected to be deployed gradually from 2029. This major contract is shared among four companies: L3Harris, Lockheed Martin, Northrop Grumman, and Rocket Lab, with each company receiving orders worth hundreds of millions of dollars. Rocket Lab, in particular, has secured its largest government order to date, signaling the rise of innovative disruptors in key national security contracts. The PWSA project aims to build a Low Earth Orbit (LEO) constellation made up of military satellites, providing end-to-end missile warning, tracking, and defense services. The project is implemented in phases, continuously upgrading satellite performance to address increasingly complex space security challenges. From initial concept validation to ongoing capability enhancement, the PWSA project has gradually become an essential part of the U.S. space defense system. Goldman Sachs Group, Inc. provides a detailed analysis in the report of the contract awards and values for each batch of satellites. Since the project's inception, SDA has awarded contracts worth $13.6 billion for the construction of 518 tracking and communication satellites. The award of the third batch of tracking layer satellites not only maintains a growing trend in quantity but also achieves significant technological upgrades, including better missile tracking sensitivity and accuracy, stronger target positioning capabilities, and advanced tactical data link and RF communication functions. Specifically, the SDA divides its satellite iteration plan into multiple "batches:" Batch 0 deployed 28 satellites, Batch 1 expanded to 154, Batch 2 further increased to 264, and the current Batch 3 under construction includes 72 satellites. So far, SDA has allocated $13.6 billion to build a total of 518 tracking and transport satellites. Although SDA has indicated that the number of satellites in each new batch will increase, the 2026 fiscal year budget request submitted does not include specific funding for Batch 3 transport layer satellites. For companies participating in the project, these contracts not only bring significant revenue growth but also align strategically with the rapidly growing areas in the U.S. defense budget, potentially surpassing peer growth in the medium term. Analysts at Goldman Sachs Group, Inc. indicate that L3Harris' contract amount aligns with its targets, and Rocket Lab has successfully seized a larger market opportunity than before. Lockheed Martin and Northrop Grumman, traditional defense contractors, continue to play crucial roles in the project. Specifically, Goldman Sachs Group, Inc. rates L3Harris as a buy, with a 12-month target price of $351, based on a projected 4.75% free cash flow yield in 2026. However, L3Harris faces risks such as fluctuations in defense spending priorities, uncertainties in profit margins and project execution, and potential issues in capital allocation. Turning to Northrop Grumman, Goldman Sachs Group, Inc. rates it as neutral with a 12-month target price of $533, calculated at 0.99 times the expected 2026 calendar year P/E relative to the S&P 500 index (excluding pensions). Northrop Grumman faces risks related to political factors from GEO Group Inc, adjustments in defense spending priorities, the rationality of capital allocation, and changes in profit margins. Regarding Rocket Lab, Goldman Sachs Group, Inc. rates it as neutral with a 12-month target price of $47, based on a projected enterprise value/sales ratio of 23.0 times in the 2027 fiscal year and discounted at a rate of 10% for one year. The main risks faced by Rocket Lab include challenges in product expansion, pressures from incremental capital investments, and risks from aggressive contract underwriting. Finally, Lockheed Martin receives a sell rating from Goldman Sachs Group, Inc., with a 12-month target price of $430, determined at 0.81 times the expected 2026 calendar year P/E relative to the S&P 500 index (excluding pensions). Lockheed Martin faces risks related to political factors from GEO Group Inc, changes in defense spending priorities, capital allocation, and more. In addition, Goldman Sachs Group, Inc. emphasizes the profound impact of the PWSA project on the satellite communication and navigation sector. As the low-orbit satellite constellation continues to improve, global low-latency communication access will become a reality, providing strong support for emerging applications such as telemedicine, autonomous driving, and augmented reality. Furthermore, advancements in satellite technology will drive the development of 6G networks, enabling seamless mobile network services. However, the aerospace sector's development also faces numerous challenges, including high launch costs, bandwidth and latency issues, and space debris, which are critical factors inhibiting further industry growth. Goldman Sachs Group, Inc. believes that only through technological innovation and capital investment can these obstacles be effectively overcome, driving sustainable development in the aerospace sector.