Intuitive machines (NASDAQ: LUNR)a manufacturer of lunar landing and exploration vehicles, went public on February 14, 2023 by merging with a special purpose acquisition company (SPAC). Shares of the combined company started trading at $10, rose to a record high of $81.99 a week later, but had fallen to around $2 by early 2024.
Like many other SPAC-backed space stocks, Intuitive Machines has over-promised and under-delivered. The company largely missed its initial revenue targets after delaying the launch of its Nova-C lander and winning fewer new contracts. Rising interest rates also cast a sharp spotlight on losses and sent exuberant valuations tumbling.
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But over the past 12 months, Intuitive’s stock has nearly quadrupled as it finally achieved its first successful moon landing, secured new NASA contracts and expanded its ride-sharing service for delivering third-party payloads to the moon.
It may seem wise to take some profits after that huge rally, but Wall Street remains optimistic about its growth prospects. All five analysts covering Intuitive rate it a Buy, with price targets of $15 to $20. Roth MKM, which set the high bar of $20 last month, believes the company can generate steady revenue growth through multiple programs as it gradually gears up for its second lunar launch.
So should you buy this stock while it’s still trading around $13?
Intuitive Machines signed three major contracts with NASA in 2021 and originally planned to launch its first Nova-C lunar lander that same year. However, that launch was repeatedly postponed until February 2024.
That highly anticipated launch, which marked the first successful U.S. moon landing since 1972, led NASA to award Intuitive Machines a new lunar terrain vehicle (LTV) contract in April and a new commercial lunar payload services (CLPS) contract with NASA in August. and an exclusive five-year Near Space Network (NSN) contract worth up to $4.8 billion in September. It ended the third quarter of 2024 with a record quarterly backlog of $316.2 million.
Intuitive expects its closer relationship with NASA, new non-NASA contracts and the expansion of its commercial ride-sharing business to increase its annual revenue from $80 million in 2023 to $215 million to $235 million in 2024. From 2024 to 2026, expect analysts say revenue will more than double from $228 million to $497 million.
With an enterprise value of $1 billion, Intuitive still looks like a bargain at four times this year’s revenue and just twice its estimated 2026 revenue. Analysts also expect adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to turn positive in 2025 and jumping to $44 million in 2026. On the balance sheet side, Intuitive had nearly $90 million in cash and equivalents at the end of 2025 on, without debt. the third quarter, and CEO Stephen Altemus said he still has “sufficient liquidity” for his “blueprint to commercialize the moon” during his latest conference call.
Intuitive Machines may seem undervalued relative to its growth potential, but the company has also increased its share count by nearly 350% since the completion of its SPAC merger. The company also recently priced a $110 million new equity offering and a concurrent private placement at just $10.50 per share – which is roughly 15% below the current price.
That strategy is necessary to cover the stock-based compensation and generate new cash, but that continued dilution is still a warning sign. Moreover, the insiders sold more than five times as many shares as they bought in the past twelve months.
Investors also shouldn’t assume that Intuitive can stay ahead of its growing list of competitors, which includes aerospace giants like Northrop Grumman (NYSE: NOC)as well as popular startups like Lunar Outpost. If those competitors pull future contracts away from Intuitive, it could struggle to expand its business in the coming years.
I think investors can nibble on Intuitive Machines stock while it’s still trading below the $15-$20 price range that Wall Street analysts are targeting. But it will remain volatile for the foreseeable future; it’s smarter to gradually accumulate this share through dollar-cost averaging, rather than just backing up the truck now.
Consider the following before buying shares in Intuitive Machines:
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Should You Buy Intuitive Machine Stocks While They’re Below $20? was originally published by The Motley Fool
