Investing.com -- KeyBanc Capital Markets upgraded two space stocks to Overweight from Sector Weight in a note on Monday, arguing that recent sector-wide volatility tied to SpaceX's record-setting IPO has created compelling entry points across commercial space names.

Rocket Lab and Firefly Aerospace are the stocks in question.

Analyst Michael Leshock set a $135 price target on Rocket Lab, reflecting roughly 40% upside, calling the company "the clear #2 to SPCX" with the potential to "achieve a similar growth trajectory to SPCX over time."

KeyBanc noted Rocket Lab's backlog stood at more than $2.2 billion as of the first quarter, up 20% sequentially and more than 100% year-over-year, with a potential $700 million Mars Telecommunications Orbiter contract award expected in the second half of 2026.

The firm estimates Rocket Lab is more than 95% vertically integrated on its satellite bus and more than 90% on its Electron rocket.

For Firefly Aerospace, KeyBanc set a $50 price target, implying more than 50% upside. The firm cited Firefly's exposure to NASA's lunar initiatives, noting its Blue Ghost lander is "the only lander from a commercial space company to achieve a fully successful landing on the Moon."

KeyBanc also pointed to the recent $75 million MoonFall NASA contract award and Firefly's SciTec missile tracking software, which "tracked ~1,000 missiles in the first 30 days" of the Iran conflict.

KeyBanc believes the sector selloff around SpaceX's IPO was "unwarranted and largely systematic," driven by funds making room for the new listing rather than any deterioration in fundamentals.

The firm cited accelerating NASA activity, constrained launch supply, and rising defense budgets, including roughly $56 billion for space-based systems in the proposed FY27 defense budget, as durable tailwinds for the sector.