Is Intuitive Machines on Sale?

In 2024, Intuitive Machines (NASDAQ:LUNR) hit an out-of-this-world milestone when it successfully put its own lander on the moon. A second landing mission is expected in February of this year, making the young startup company a force to be reckoned with in the world of privatized space exploration.

Despite having jumped significantly in the last year, bulls still make the case that Intuitive Machines could be a bargain buy today. Is Intuitive Machines selling at a discounted price, and can the company’s forward growth offer investors strong long-term returns?

Intuitive Machines Is Posting Strong Revenue Growth and Building Its Contract Base

While investing in early stage companies like Intuitive Machines can be inherently risky, the company’s revenue growth has been quite impressive. In Q3, for instance, management reported $58.5 million in top line sales, up 359% from the year-ago quarter. The same quarter saw the company win a new $116.9 million contract from NASA’s Commercial Lunar Payload Services Program.

The new NASA contract added to what was already a reasonably strong backlog of contract revenue for Intuitive Machines. Total backlog at the end of Q3 was $316.2 million.

This number didn’t yet count an additional $150 million the company expects to receive from another new NASA contract for Near Space Network data transmission services. That $150 million is for initial services, and the company says that the contract could have a maximum value as high as $4.8 billion.

If these estimates prove correct, that single Near Space Network contract could eventually generate more than twice Intuitive’s current market capitalization in revenue.

A Quick Look at LUNR’s Valuation

Between its impressive achievement of putting a spacecraft on the moon and its fast-growing contract base with NASA, it’s fair to say that Intuitive Machines is on an exponential trajectory. But that doesn’t necessarily mean that its stock is on sale right now. To determine that, we must look at the company’s valuation to see if it’s a discounted buy at today’s prices.

For high-growth stocks that aren’t yet generating reliably positive net incomes like LUNR, the price-to-sales ratio is often a useful metric to begin with. At 5.5x trailing 12-month sales, the stock doesn’t look like a bargain at first glance. If revenue growth continues at a strong pace, though, this multiple is likely to shrink rapidly.

With that said, LUNR still looks like it may have gotten too far out ahead of its fair valuation range. For instance, the average analyst price forecast for the stock is $18.40 over the next 12 months. Given that shares are already priced at $23.07, this would imply a downside of over 20%. Even the most bullish price target of $26, meanwhile, would only leave about a 12.7% upside.

Does Intuitive Machines Have Room for More Growth?

With prices still appearing somewhat high relative to financials, long-term growth seems to be the deciding factor in whether LUNR is on sale right now.

With the company’s revenues projected to grow by about 62% and losses set to narrow significantly over the coming year, the outlook is quite positive. Moreover, these trends could put the company on track for active profitability in the not-too-distant future, bolstering the value argument for the stock.

In the long run, Intuitive Machines hopes to be a major player in a private lunar economy. Projects like placing data centers on the moon or exploring mineral deposits in space could one day create large amounts of value for private companies. If Intuitive Machines becomes a go-to service provider for putting payloads on the moon, it could find itself as a critical part of an emerging space economy.

Another possible driver for the company’s long-term future could be growing interest in Martian missions. In his inaugural address, Donald Trump promised to send American astronauts to Mars, signaling a renewed commitment to space exploration.

While Intuitive Machines specializes in lunar projects, it’s far from difficult to see a successful space technology company that already has strong relationships with NASA benefiting from higher federal spending on other space exploration projects.

Is Intuitive Machines Stock Undervalued?

If Intuitive Machines contract backlog comes to fruition and results in the $4.8 billion forecast, LUNR stock is almost certainly undervalued.

Despite the stock’s high price, Intuitive Machines seems to have enough growth potential to at least make a case for its valuation. Q3’s large backlog gives investors a sense of the future revenues that the company could generate, and management is still securing valuable contracts.

The fact that Intuitive Machines already has a decent roster of contracts with NASA and has successfully put its own lander on the moon’s surface may also give it something of a moat, even if that competitive advantage is in something of a speculative line of business.

It’s worth noting that Wall Street is also rapidly taking notice of Intuitive Machines. In the last six months, institutional investors have bought about $512 million worth of the stock and sold around $143 million. Although the company’s institutional ownership is still relatively low at 33.3%, it seems that there’s strong interest in the stock among big-money buyers.

This isn’t to say that the risks associated with LUNR are insignificant. Between a valuation that will require substantial growth and an uncertain addressable market, there are still quite a few questions Intuitive Machines will have to answer for its shareholders. As such, this stock may have too many unknowns associated with it for investors who are seeking reliable, steady returns at modest risk levels.

While LUNR shares have their drawbacks, they may well be a decent choice for risk-tolerant investors looking to profit from the increasing interest in space from the private sector. If the company can keep revenue growth up, the stock could still gain ground over the long run as it gets closer to turning a net profit.

With that said, investors may need to be comfortable with volatility, as young, high-growth companies like Intuitive Machines are often subject to sudden swings in share prices that can make more conservative investors uncomfortable.

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