By Al Root
Space stocks, which have been on an epic tear, are trading lower to start a new month. Be wary as the SpaceX initial public offering looms.
Shares of Redwire, which makes solar arrays and antennas for space, among other things, were down 6.8% in early trading at $22.89 after Jefferies analyst Sheila Kahyaoglu downgraded the stock to Hold from Buy following a run-up that has left shares up 163% over the past month.
"While general excitement around space has driven the stock price move, we see limited near-term upside from here," wrote the analyst. Her price target went to $24 from $13, but she doesn't see much more upside.
General excitement around space is an understatement. Shares in the sector have risen sharply as the SpaceX IPO approaches. That IPO promises to raise a record amount of money that could value Elon Musk's space company at $2 trillion, showing investors what's possible in space.
Shares of Rocket Lab, Firefly Aerospace, Intuitive Machines, and AST SpaceMobile rose an average of 59% in April. All are down in the Monday session.
The downgrade is one catalyst for the red numbers. It forces investors to consider sky-high valuation. AST trades for 260 times estimated 2026 sales. (Sales are expected to grow rapidly when the company gets its communications satellites into orbit.) Rocket Lab trades for 91 times sales, up from less than 10 times a year ago.
Higher valuations mean that investors simply feel much better about investing in space these days. The sector's prospects are looking up, with NASA spending more on projects such as moon bases. Still, most of SpaceX's addressable market is tied to AI, according to the company; SpaceX isn't only a space play.
SpaceX's IPO could also be a reason to take profits in other space stocks. The stock market is forward-looking, and stocks react ahead of an event such as an enormous IPO.
The Procure Space exchange-traded fund, which trades under the symbol UFO, is more than 20% above its 50-day moving average. Moving averages can represent the level that supports stocks on the way down, or where investors will look to buy back in or add more exposure. A drop to the 50-day moving average could be the kind of reversal that investors are facing.
Crossing over a moving average can be a bullish or bearish signal, depending on the direction. If the UFO were to fall below its 50-day moving average, it would be about 25% above its 200-day moving average.
Exactly what will happen to any hot stock -- and when it will happen -- is difficult to say. Exercise extra caution in the space sector and pay attention to the trading ahead of the SpaceX IPO.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 01, 2026 10:35 ET (14:35 GMT)
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