Title: Should You Invest in Intuitive Machines Stock Under $20?
Intuitive Machines, the space exploration vehicle producer, celebrated its public debut on February 14, 2023, through a merge with a Special Purpose Acquisition Company (SPAC). Starting at a modest $10, its stock soared to an astounding $81.99 within a week, only to tumble down to around $2 by the beginning of 2024.
Much like many other SPAC-backed space stocks, Intuitive Machines struggled to live up to its promises, delaying its Nova-C lunar lander launch and missing initial revenue targets due to fewer secured contracts. The rising interest rates cast a harsh light on its losses and deflated its valuations.
However, Intuitive Machines managed to bounce back, nearly quadrupling its stock price over the past 12 months. Its major accomplishments included its first successful lunar landing, securing new NASA contracts, and expanding its "ride-sharing" service for delivering third-party payloads to the moon.
Despite the stock's recent rally, analysts remain optimistic about its growth prospects. All five analysts covering Intuitive rate it as a "buy," with prices targets ranging from $15 to $20. Roth MKM, the firm with the highest target, believes Intuitive Machines can generate steady revenue growth across multiple programs as it prepares for its second moon launch.
Bullish Reasons for Analysts
Intuitive Machines' relationship with NASA has significantly strengthened following several major contracts in 2021. These included a lunar terrain vehicle (LTV) contract, a CLPS contract, and an exclusive five-year near-space network (NSN) contract worth up to $4.8 billion. These contracts, alongside new non-NASA contracts and the expansion of its ride-sharing business, are projected to boost its annual revenue from $80 million in 2023 to $215 million to $235 million in 2024. Analysts forecast its revenue to more than double from $228 million to $497 million from 2024 to 2026.
With an enterprise value of $1 billion, Intuitive Machines still presents an appealing value proposition at 4 times this year's sales and 2 times its estimated sales for 2026. Analysts also anticipate its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to turn positive in 2025 and reach an impressive $44 million in 2026. Intuitive Machines closed the third quarter of 2024 with a record quarterly backlog of $316.2 million, highlighting its strong financial position.
Potential Risks
While Intuitive Machines appears to be an attractive investment option, it does carry some risks. The company's stock count skyrocketed by nearly 350% since closing its SPAC merger, and it recently priced another upsized $110 million stock offering and private placement at $10.50 - a price point lower than its current trading price. While this dilution strategy covers stock-based compensation and generates fresh capital, it is still a source of concern.
Additionally, Intuitive Machines' insiders have sold more than five times the shares they purchased over the past 12 months. Investors should also be cautious about maintaining a competitive edge in a rapidly evolving space industry, with competitors like Northrop Grumman and Lunar Outpost posing potential threats to Intuitive Machines' future contracts.
Investment Considerations
Given the bullish analyst sentiment and Intuitive Machines' impressive performance, investors can consider purchasing its stock below the anticipated $15-$20 price range. However, due to its volatility and ongoing dilution concerns, it may be wise to gradually accumulate the stock through dollar-cost averaging, rather than making a large investment upfront.
After experiencing significant financial challenges, Intuitive Machines has managed to rebound, largely due to its successes in space exploration and securing new contracts with NASA and other clients. This resurgence has caught the attention of financial analysts, who are now bullish about its growth prospects. In light of the company's strengthened relationship with NASA, analysts predict that Intuitive Machines' annual revenue will significantly increase, potentially doubling by 2026. As a result, investing in Intuitative Machines could be an attractive opportunity for those seeking to allocate their money in the finance sector, given its appealing valuation and steady revenue growth projections.
