Daimo takes stock of the valuation changes in the three major sectors of the US stock market, aerospace/defense, and space. Which targets are worth paying attention to?

The Zhitong Finance App learned that in a research report released recently, Morgan Stanley took stock of changes in the valuation multiples of the aerospace, defense, and space companies covered by the bank in 2025. Damo concluded that in the aerospace sector, strong air traffic supported its valuation multiplier growth to outperform the S&P 500 index; in the defense sector, government spending and easing concerns related to the Ministry of Government Efficiency (DOGE) provided support for the valuation multiples; and the valuation multiples in the space sector experienced significant fluctuations.

The valuation of the aerospace sector has climbed

Damo pointed out that the valuation of the aerospace sector is slightly higher than its historical level. Based on the corporate value multiplier for the next 12 months (NTM EV/EBITDA), the current transaction price has a median premium of about 15% compared to the S&P 500 index (in comparison, the average premium since 2022 is about 10%).

The aerospace sector has performed steadily since this year. NTM EV/EBITDA has climbed from about 16 times at the beginning of the year to about 18 times now, thanks to strong air traffic (for example, the Sunday after Thanksgiving was the busiest day in the history of US airports, and the US Transportation Security Administration screened 3.1 million passengers). Although when the so-called “Liberation Day” tariff measures were introduced in early April, the aerospace sector experienced some correction along with the general market due to concerns about supply chain challenges and the impact of tariffs on aircraft deliveries, but as these negative effects did not become apparent, the sector's valuation quickly rebounded.

Among the companies related to the aerospace sector covered by Damoso, US stocks that the bank gave “added” ratings include: Raytheon Technology (RTX.US), Howmet Aerospace (HWM.US), TransDigm (TDG.US), Curtiss-Wright (CW.US), FTAI Aviation (FTAI.US), RBC Bearings (RBC.US), Brazilian Aerospace Industries (EMBJ.US), Loar Holdings ( LOAR.US). Among them, the target price given by the bank indicates that Loar Holdings and TransDigm have room to increase by 36% and 26%, respectively.

The defense sector benefits from government spending and DOGE concerns ease

Damo pointed out that the valuation multiples of major US defense contractors improved in 2025. Currently, NTM's median price-earnings ratio is about 20 times, compared to about 17 times at the beginning of 2025. However, its multiplier expansion is slower than the S&P 500 index (currently the median discount of about 12% for major defense contractors compared to the S&P 500 index based on the NTM price-earnings ratio is about 12%, which is the same as about 12% in early 2025).

Damo believes that the valuation multiples experienced by major defense contractors this year were partly due to investors' concerns about DOGE driving defense spending cuts eased at the end of 2024, because such cuts did not become a reality. Furthermore, US President Trump's executive order around the “Golden Dome Plan” and other priorities conveyed by the current administration and the War Department, and subsequent funding allocations in the “Big and American Act” (including about $24 billion for the “Golden Dome Program” and about 150 billion US dollars for overall defense) provided a smooth wind for the sector and provided a potential medium- to long-term growth source for major contractors. Among them, L3Harris (LHX.US) performed particularly well, thanks to its strong operating performance throughout the year, and investors believed that the company was less affected by the rise of emerging defense technology companies.

Among the companies related to the defense sector covered by Damo, the bank gave “excess” ratings to US stocks, including Lockheed Martin (LMT.US) and Northrop Grumman (NOC.US), which suggest that there is room for 33% and 29% increase for these two stocks, respectively.

The valuation of the space sector soared and then slipped

Damo pointed out that the space sector has fluctuated drastically this year. NTM's median corporate value/sales reached more than 10 times in September, then fell back to about 4 times in November, and has now rebounded slightly to about 6 times. The sector had two major IPOs this year — Voyager (VOYG.US) and Firefly (FLY.US). The market capitalization of these two companies rose rapidly after listing, but since then, due to investors' risk aversion, their stock prices have now fallen below the issue price, falling about 14% and 51% respectively during the year.

Specifically, for Firefly, the abnormal situation experienced during the pre-flight test on September 25, 2025 was a negative catalyst for its stock price. For Voyager, investors still view the selection surrounding the Starlab program next year as a decisive binary event.

Rocket Lab (RKLB.US) and Planet Labs (PL.US) remain the highlights, trading at around 35x NTM EV/EBITDA and 11x NTM EV/EBITDA respectively. Rocket Lab's stock price was supported by its successful operation, and Planet Labs received a positive response from the market for its transformation to a new business model focused on providing space solutions rather than just raw data input.

Among the companies related to the space sector covered by Damo, the bank gave BETA Technologies (BETA.US) a “plus” rating for the US stock, which suggests that there is room for an 8% increase in the target price of the stock. Furthermore, the bank rated both Rocket Lab and Planet Labs as “holding shares on the sidelines.”