• The firm downgraded Redwire to “Hold” from “Buy” and flagged the stock’s stellar rally.
• It believes the company faces limited near-term upside and needs to demonstrate backlog conversion.
• RDW currently trades nearly 9x its estimated sales for this year, up from more than 3x last year, the firm said.

Shares of Redwire Corporation (RDW) slumped on Monday after Jefferies downgraded the aerospace and space infrastructure company, citing a valuation disconnect amid a broader sector rally, driven by optimism around SpaceX's IPO.

At the time of writing, RDW stock was down nearly 16% and on track for its biggest single-day percentage decline in six months if session losses hold.

Jefferies Downgrades Redwire

The firm downgraded Redwire to “Hold” from “Buy” and highlighted the stock’s stellar rally in May, during which it more than doubled in value from the increased interest in space sector stocks.

“While general excitement around space has driven the stock price move, we see limited near-term upside from here,” Jefferies reportedly said in its research note, according to Barron’s.

The firm said it awaits seeing meaningful backlog conversion by the company before it could change its stance. RDW’s new price target of $24, hiked from $13, doesn’t imply scope for growth in stock price.

Jefferies also noted that Redwire trades nearly 9x its estimated sales for this year, up from more than 3x last year, Barron’s reported.

The SpaceX Effect

SpaceX’s planned public listing, which is expected later this month, has sent shares of AST Space Mobile (ASTS), Voyager Technologies (VOYG), Firefly Aerospace (FLY), and Rocket Lab (RKLB) surging between 45% and 85% so far this year, signaling strong investor sentiment about space-related stocks. At the same time, Intuitive Machines (LUNR) and Planet Labs (PL) have more than doubled in value.

SpaceX is expecting to raise more than $86 billion at a $2 trillion valuation, making it the largest initial public offering in U.S. history.

What Retail Traders Think About RDW

On Stocktwits, retail sentiment toward RDW stock remained in the ‘extremely bullish’ territory over the last 24 hours.

One user on the platform noted the pullback in the current session and called it “a brutal day for the sector.”

Another user sees the pullback as a buying opportunity.

RDW stock has nearly tripled in value so far this year and gained more than 47% over the past 12 months, outperforming the benchmark S&P Index.

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