Boy oh boy, does NASA ever love Intuitive Machines (NASDAQ: LUNR)! The tiny space company landed a robot on the Moon earlier this year -- America's first (albeit unmanned) Moon landing since the Apollo program of the 1960s and 1970s.
Intuitive called the mission that broke America's losing streak IM-1, and later this year the company will gear up to go to the Moon again with IM-2. A third mission -- surprise! they'll call it IM-3 -- is scheduled to take off in October 2025.
And now here's the latest news -- there's going to be an IM-4 as well.
A $117 million contract for a $313 million company
This latest news dropped late last month, with Intuitive Machines' announcement that it has won a $116.9 million NASA contract to deliver six science and technology payloads to the lunar south pole.
On top of the NASA payloads (and one for the European Space Agency), Intuitive anticipates supplementing its income from this mission by carrying additional "commercial payload mass" for other customers on the same lander. It's therefore hard to say exactly how much revenue this mission will end up producing for Intuitive -- but the floor value is at least $116.9 million.
Is this good news for Intuitive Machines? Investors seem to think so. They've bid up Intuitive Machines' stock price by 20% in the two weeks since the news came out. And I'd agree this sounds propitious. Over the past year, Intuitive's total revenue amounted to less than $158 million. The new NASA contract promises to be worth close to that much, for just a single mission.
Why NASA should love Intuitive Machines (and taxpayers should, too)
As much as investors (and NASA) like Intuitive Machines, taxpayers should arguably like it even more.
Consider: 58 years ago, America's first-ever robotic landing on the Moon was the Surveyor 1 mission, launched in 1966 (three years before Apollo 11 put boots on the Moon). Over the course of the Surveyor program, NASA launched a total of seven landers, of which five landed on the Moon safely. The total cost of the program was $469 million -- about $4.2 billion in today's dollars. So each successful landing cost about $840 million.
Compared to that, the $117 million in taxpayer dollars that Intuitive Machines is charging for IM-4 (very similar to the $118 million paid for IM-1) represents savings of about 86%. Meanwhile, thanks to runaway costs on the Boeing-led Space Launch System rocket, the Project Artemis mission to return astronauts to the Moon is already looking likely to cost more than the original cost of the Apollo program (in inflation-adjusted dollars).
What it means for investors
The fact that this space company has proven capable of delivering payloads to the Moon -- and savings to taxpayers -- should make a lot of people happy. But will investors be happy with Intuitive Machines?
That depends largely on how successful Intuitive Machines is at winning even more NASA contracts, and contracts from private commercial companies as well. If Intuitive succeeds in launching two missions this year, it will be on course to hit analyst forecasts to nearly triple 2023 revenue to more than $220 million in 2024. Further contract wins could succeed in doubling revenue again by 2026. (Analysts predict $475 million.)
This would presumably require Intuitive Machines to conduct four Moon missions per year -- not an unreasonable goal given Intuitive's success in putting the first American lander on the Moon in more than 50 years, giving it pole position in this industry. Not an unreasonable goal, either, if the company proves capable of putting two landers on the Moon as early as this year.
Analysts believe that if Intuitive does succeed in growing revenue to this level, it will have enough business to begin earning a profit ($0.24 per share in 2026) and positive free cash flow as well ($25 million).
Granted, even assuming all this happens on schedule, it means Intuitive Machines stock today is selling for 24 times fully diluted earnings, and 30 times free cash flow -- that it won't either earn or generate for two more years. That's a rich valuation. Intuitive Machines will need to maintain and even accelerate its growth pace to deserve it.
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Rich Smith 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.
