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Intuitive Machines Stock Takes Off Like a Rocket

February 21. 2023. 6 mins read

At the end of last year, we checked in with the constellation of NewSpace stocks that we’ve been tracking since a dozen of them went public through reverse mergers with blank-check companies. The title of the article pretty much said it all: Just How Low Can Space Stocks Go? Well, most of them appear to have bounced back a bit since the beginning of this year. Shares for all but two of them are actually in positive territory (but still well below the $10 baseline). In particular, Virgin Galactic (SPCE) and Redwire (RDW) are up by about +83% and +95%, respectively, in 2023. 

This reflects the volatility that we’ve come to expect from this nascent industry where newbie investors jump at every bit of positive and negative news. These stocks also tend to ebb and flow in unison. For example, nearly all of them jumped around Jan. 17 when China announced it had finished building a new Death Star space station. You can see some other inexplicable jumps among space stocks, culminating in the huge leaps by both Virgin Galactic and Redwire right around Valentine’s Day.

Stock performance of 12 space stocks since the beginning of 2023.
The dirty dozen of space stocks. Yes, there’s a lot of squiggly lines, but notice how they mostly work in tandem. Now there’s a 13th space stock, Intuitive Machines stock. Credit: Yahoo Finance

So why did investors shower these two space stocks with so much love? In the case of Virgin Galactic, we have no idea, except that the space tourism company announced it would release its year-end results at the end of this month. In addition, the company conducted a successful test flight of its carrier aircraft, VMS Eve, on Feb. 15. The jump in Redwire stock, a pure play in space infrastructure, probably had more to do with the premiere of Intuitive Machines (LUNR) stock on the Nasdaq last week. 

About Intuitive Machines Stock

Click for company website

Yes, we now have a 13th publicly traded NewSpace stock via a special purpose acquisition company (SPAC). Founded 10 years ago, the Houston-based outfit bills itself as a “leading space exploration, infrastructure, and services company.” It closed its merger with a SPAC called Inflection Point Acquisition Corp. and started trading on V Day. And, for no particular reason we can fathom, the stock ended its short week in the public spotlight up nearly +300%. It makes even less sense when you consider that the offering failed to raise anywhere close to what was expected. When the stock price starts to rapidly disassociate itself from the intrinsic value of the company, that usually points to one thing – it’s being pumped.

Institutional investors weren’t too excited about the deal when they pulled their money out of the SPAC before the merger was blessed earlier this month. Intuitive Machines walked away with just $55 million. That money had been locked in – $29 million from the SPAC trust that was part of a non-redemption agreement and another $26 million in private equity. The other $301 million in the SPAC trust just walked away.

What Does Intuitive Machines Do?

Let’s set aside the absurd performance of Intuitive Machines stock and its dodgy SPAC past, and try to figure out this space company. Like Redwire, Intuitive Machines is a space manufacturing, infrastructure, and services company. It offers products and services like lunar landers, in-orbit satellite repair, and space communications – at least in theory (more on that in a moment). The company has four business segments:

  • Lunar Access Services: Currently, the only business unit earning its keep. Developing lunar landers, among other space stuff. 
  • Lunar Data Services: A communications network for the moon.
  • Orbital Services: Services include satellite positioning and servicing, refueling, and removing orbital debris.
  • Space Products/Infrastructure: This is the everything else business bucket, from blow-up habitats for glamping on the moon to a lunar all-terrain vehicle for tearing up the moon’s surface.

A few points to make here. Intuitive Machines is purpose-built to be a major player in the future moon economy. NASA is the economic engine, kicking things off with the Artemis program. This $93 billion space opera seeks to send the first woman to the moon to create a permanent human presence on that cold, dead rock. The effort involves heavily funding the private sector to do all of the work, including new launch systems, robotic landers, and even a private space station orbiting the moon. 

On one hand, Intuitive Machines seems well positioned to be a major player, with reportedly $317 million from NASA for three missions. We say “reportedly” because we could only confirm $124 million. It appears most, if not all, of the money is to support the Commercial Lunar Payload Services (CLPS) program, which involves ferrying robotic landers and rovers to the moon’s surface. That’s all Lunar Access Services business. The company goes on to claim that this business segment will generate more than $279 million annually by 2024. 

Business segment of Intuitive Machines.
Credit: Intuitive Machines

On the other hand, this is outer space, the final frontier. Launching rockets with regularity like SpaceX is doing is the result of decades of development. Building space stations? Sure, there is a history assembling these structures in space. Landers and rovers? Roughly half of all Mars missions have failed (though the percentage has improved more recently). The launch of the James Webb Telescope was delayed by a decade. Yet we’re led to believe that Intuitive Machines will be generating this kind of revenue in just a couple of years:

Projected revenue for Intuitive Machines.
Credit: Intuitive Machines

Those numbers represent $759 million in total revenue, with a compound annual growth rate of nearly 200%, and a 31% gross margin. In addition, Intuitive Machines claims its total addressable market is $120 billion, though that includes the Artemis program. This is the stuff of science fiction – with a special emphasis on fiction. And there’s more where that came from.

Should You Buy Intuitive Machines Stock?

There was a short-lived sci-fi series called Space: 1999 about a lunar base that suddenly finds itself hurtling through interstellar space and wormholes after a nuclear explosion turns the moon into a rocket ship. Space is a high-risk venture, and as far as we know, no one has proven it’s a profitable business in terms of the NewSpace economy. SpaceX has raised more than $9 billion in disclosed funding and grants, including more than $2 billion in 2022 alone. While we don’t know its financials as a private company, SpaceX is probably not profitable, based on how often it has to ask investors for more money. Its next closest rival, Rocket Lab (RKLB), spends more to launch rockets than it takes in – and is far from profitable. 

Intuitive Machines roadmap.
Don’t blow up the moon! Credit: Intuitive Machines

While they haven’t filed a 10-K for 2022 yet, we did find some basic financials that accompanied the many documents filed with the SEC for the SPAC deal. For the first nine months of 2022, Intuitive managed roughly $50 million in revenues. To hit their glossy SPAC deck targets, they’ll need a whopping $38 million in fourth quarter revenues.

Since we’re mostly working off of investor decks at this stage of the game, we don’t have much transparency into the numbers. We do know that all but $6.3 million of the estimated $88 million in 2022 revenue is from NASA contracts (and that’s down from the estimated $102 million from the September 2022 SPAC investor deck). The $6.3 million is from Axiom Space for work related to construction of a space station for a different NASA contract under the Artemis program. This is serious customer concentration risk. 

Timeline for lander missions by Intuitive Machines.
Let’s see if Intuitive Machines can get its first lander to the moon before we even think about investing. Credit: Intuitive Machines

The founder of Axiom Space is a guy named Kam Ghaffarian, who is also a co-founder of Intuitive Machines and owns nearly half the business post merger. He made his bones by selling the business he co-founded, SGT, an engineering and space services company, to the defense contractor KBR for $355 million. The CEO and president of Intuitive Machines is Steve Altemus, a former deputy director at NASA’s Johnson Space Center. These don’t seem like the kind of guys who will accidentally blow up the moon, but we’re also not blown away by the current business, which relies entirely on government contracts. Until we see realistic numbers and serious diversification, investing in Intuitive Machines stock is a non-starter for us, especially given how much this stock is being pumped post-SPAC.

Conclusion

On the tin, Intuitive Machines looks like a cool company. It seems to have an experienced management team with vision and a strategy of winning big contracts from NASA. So far, that strategy is working and could be a viable business. As risk-averse investors, we believe having the U.S. government as your one and only customer is too much of a feast or famine proposition for a publicly traded entity. Throw in the uncertainty of exploding moon bases, and no one can hear investors scream in space when Congress decides to axe Artemis some day. Prospective investors should wait for the dust to settle, and for a proper SEC filing document to analyze the full 2022 results.

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