This rocket stock is testing a key level once again. Why Todd Gordon thinks it's a buy

Rocket Lab shares surged ~20% after announcing it will acquire Iridium Communications for roughly $8B, positioning the combined company as an integrated, weather-proof satellite network provider rather than a broadband (Starlink) competitor. The deal adds 2.55M subscribers and is expected to close next year, boosting recurring revenue alongside Rocket Lab’s cited $2.2B backlog and an accelerating path toward positive EBITDA/net income in 2027. The article also flags a technical pattern: the stock has tested its rising 200-day moving average four times since early 2025, with prior tests leading to new highs, and the latest drop (~47% off the May high) appears to be stabilizing.

Analysis

The market is not rewarding a simple M&A headline; it is paying for a business-model change. RKLB is being re-rated from a high-beta launch name to a vertically integrated cash-flow story, which can compress the valuation gap to higher-multiple space/platform peers if management proves the acquired revenue is sticky and low-churn. The first-order pop is likely momentum and short-covering, but the more durable effect depends on whether this can translate into visible EBITDA lift over the next 2-4 quarters rather than just more revenue and more capex.

Second-order, the deal raises the bar on execution. Owning a network adds customer-support obligations, integration risk, and working-capital drag, so the market should scrutinize free-cash-flow conversion much more than top-line growth. If the purchase is financed with equity or expensive debt, dilution and leverage could cap the multiple expansion even if the story improves; that is the key risk to the bullish thesis over 6-18 months.

IRDM is the obvious event-driven winner because the downside becomes largely a spread/close-risk question rather than a fundamental one. The bigger losers may be public launch-only or legacy satellite-comms names whose valuation support rests on being the only way to play secure, mission-critical space infrastructure; once RKLB is seen as a full-stack platform, relative scarcity value shifts toward it, not the incumbents. The contrarian miss is that this is not a direct Starlink fight: the market may be overestimating TAM overlap and underestimating how much of the value here comes from government, maritime, and remote-enterprise redundancy demand, where reliability matters more than bandwidth.

Key Decisions for Investors

• Long RKLB on pullbacks or a clean reclaim of prior highs; use a 3-6 month horizon and treat the 200-day as the invalidation level. Risk/reward is favorable only if the market keeps rewarding the platform narrative; exit if the post-announcement squeeze fades back below support.
• Buy RKLB call spreads rather than outright equity if you want convexity into the next earnings cycle. The trade works best if the market continues to pay up for vertical integration, but the spread structure limits damage if financing or integration concerns compress the multiple.
• Long IRDM only as a merger-arbitrage / spread trade, not as a directional growth bet. Size should wait for definitive terms, because the upside is capped and the primary risk is deal-structure or regulatory slippage, not business fundamentals.
• Pair trade: long RKLB / short VSAT over 1-3 months to express the re-rating toward a full-stack, recurring-revenue space platform versus a more mature, leveraged satcom incumbent. Cover if RKLB fails to hold its breakout and the market decides this was just a sentiment spike.
• Set an alert for RKLB below the 200-day moving average on volume after the initial announcement impulse. That would suggest the move was technical rather than fundamental and is a good point to cut exposure or switch to a smaller, options-based expression.