Is Rocket Lab USA (RKLB) Among the Best Mid Cap Defense Stocks to Buy According to Analysts?

We recently published a list of the 10 Best Mid Cap Defense Stocks to Buy According to Analysts. In this article, we will take a look at where Rocket Lab USA, Inc. (NASDAQ:RKLB) stands against other best mid cap defense stocks.

Defense stocks have surged over the past week after President Trump unveiled plans for a $1 trillion defense budget for fiscal 2026, representing a 12% increase from the current year. Here is what he told reporters on April 7:

“Nobody’s seen anything like it. We have to build our military and we’re very cost-conscious, but the military is something that we have to build. And we have to be strong because you’ve got a lot of bad forces out there now. So we’re going to be approving a budget and I’m proud to say actually, the biggest one we’ve ever done for the military.”

READ ALSO: 10 Best Performing Defense Stocks So Far in 2025 and 10 Best Large Cap Defense Stocks to Buy Now.

This is an encouraging development for America’s defense sector, which had a subdued start to the year due to uncertainty around budget cuts. The creation of DOGE had also reshaped investors’ views of the industry.

Stocks got another boost last week after market chatter that tariff negotiations to address trade imbalances could include commitments from foreign countries to buy weapons from the US. On April 7, Vietnam’s prime minister issued a statement, asking for a 45-day delay in the imposition of tariffs and stating his country would buy more American goods, including arms, to tackle the trade gap.

Defense stocks have soared in Europe this year, as regional capitals unlocked billions to supercharge their militaries. While a steep selloff in response to the tariffs sparked a major plunge in shares last week, this has been a year to remember for several European defense companies that have seen double-digit returns so far in 2025.

Analysts at Citi believe defense stocks are poised for outperformance due to minimal tariff exposure, increased military budgets, and rising geopolitical tensions. Jason Gursky stated the following in a detailed preview to clients on April 10:

“We materially change the rank order of our stock picks, moving our defense coverage to the top of the list given our positive view on the outlook for global defense spending.”

Investors are also buoyed by the unveiling of a new next-generation fighter jet, the F-47, to replace the F-22 Raptor. President Trump has also announced that he will resurrect America’s military and commercial shipbuilding industry, which he sees as vital to national security, given the strategic competition with China.

Methodology

For this article, we sifted through screeners to identify mid-cap stocks in the aerospace and defense industry. These stocks have a market cap between $2 billion and $10 billion. From there, we picked the top 10 defense stocks with the highest positive share price upside potential. All data is as of the close of business on Friday, April 11, 2025.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Rocket Lab USA, Inc. (NASDAQ:RKLB)

Market Cap: $8.90 billion

Share Price Upside Potential: 20.48%

Rocket Lab USA, Inc. (NASDAQ:RKLB) is an end-to-end space company delivering reliable launch services, spacecraft components, spacecraft design services, and related software to support the space economy.  It is also working on several defense contracts.

The US Space Force recently selected the company to compete for the DoD’s highest-priority missions for the National Security Space Launch (NSSL) Phase 3 Lane 1 program. This will be a five-year IDIQ contract with a ceiling of $5.6 billion. Analysts believe this is a big opportunity for Rocket Lab USA, Inc. (NASDAQ:RKLB) to position itself as an important player in national security missions.

In January this year, Rocket Lab USA, Inc. (NASDAQ:RKLB) was picked by Kratos as part of a team to deliver hypersonic test launches for the DoD. The contract has a potential value of $1.45 billion and is aimed at providing a cost-effective bridge between hypersonic ground tests and system-level flight tests.

These latest developments have bolstered investor sentiment around the stock. ClearBridge Small Cap Growth Strategy stated the following regarding Rocket Lab USA, Inc. (NASDAQ:RKLB) in its Q1 2025 investor letter:

“Rocket Lab USA is a manufacturer of spacecraft and satellite components as well as a service provider for satellite launch services, primarily focused today on smaller payloads. With an innovative founder-led management team competing in an enormous market with significant growth in commercial, government and classified applications, we see significant growth potential.”

According to Insider Monkey’s database for Q4 2024, 37 hedge funds held a stake in the company, up from 16 at the end of the third quarter. Wall Street analysts are bullish on Rocket Lab USA, Inc. (NASDAQ:RKLB), with a consensus Buy rating and an average share price potential of 20.48%. It is one of the best mid cap stocks to buy.

Overall, RKLB ranks 7th among the 10 best mid cap defense stocks to buy according to analysts. While we acknowledge the potential of defense companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than RKLB but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires

Disclosure: None. This article is originally published at Insider Monkey.