Rocket Lab USA's (RKLB) recent deal for the first two Neutron launches supports the company's plans for bringing its new rocket online, though its stock is expected to remain volatile ahead of the initial liftoff, Morgan Stanley said Monday in a report.

The agreement with an undisclosed commercial satellite constellation operator includes launching two dedicated missions starting in mid-2026.

The accord "lends important credence to [management's] targeted timeline for bringing its new rocket online, though we note guidance around Neutron's initial launch cadence remains unchanged," Morgan Stanley said. "We expect the stock to remain volatile as Neutron's first flight nears and details trickle out around the early launch manifest."

Morgan Stanley raised its price target on Rocket Lab stock to $18 from $6.50 and reiterated its equal-weight rating.

"Given the inherent risks in bringing a new, large rocket to market, along with a quickly evolving competitive landscape, we continue to see a wide range of outcomes" for Rocket Lab, Morgan Stanley said. "While we see fundamental valuation supporting $18 per share, we see fair value in our base case range of $10-25 per share, which we are increasing from a prior $4-10 on incremental visibility into Neutron's potential."

Rocket Lab shares rose 2% in recent Monday trading.

Price: 19.38, Change: +0.38, Percent Change: +1.97