Intuitive Machie: Is this Space Stock Offering Massive Buy the Dip Opportunity?
2024.12.11 10:40
Since the last Intuitive Machines (NASDAQ:) coverage at the end of November, LUNR stock price dropped from $15.07 to the current $12.17 per share. The primary culprit is the sale of 9.5 million LUNR shares announced on December 3rd at $10.50 per share.
The lunar exploration company gave underwriters (financial firms handling the sale) the option to sell up to 1.4 million extra shares if the demand warrants it. This itself, as the upsized public offering, signaled strong interest expected to return $104.25 million in gross proceeds.
On the other hand, the $10.50 price tag is significantly lower than the bottom LUNR estimate of $15 per share, according to the average from 4 analyst inputs (Benchmark Company, Roth Capital, Canaccord Genui and Cantor Fitzgera).
This aligns with the thesis laid out in September’s coverage of Intuitive Machines. Namely, the chronological distance between IM missions is likely to lead to discounted periods. Therefore, IM leadership is capitalizing on hype waves in between.
Presently, LUNR stock shows resilience to dilution, having gone up 1.3% over the last 5 days. Given that the median LUNR price target is $16.7 per share, should investors consider buying the dip?
IM’s Missions as Valuation Boosters
In February 2023, Intuitive Machines had its all-time high price of $81.99 per share. This was just after the completed merger with a special purpose acquisition company (SPAC), Inflection Point Acquisition Corp., on February 13th. Interestingly, the company’s leadership, headed by co-founder and CEO Steve Altemus, expected ~$330 million capital post-SPAC in September 2022 investor presentation, plus $50 million from sponsors.
The merger not only delivered less than expected, at $301 million, but shareholders redeemed most of the shares, $279.8 million worth. It seems that investors expected NASA contracts to make up for the pulled operational capital, based on three previously secured NASA contracts for lunar payloads.
This indeed happened. After successfully completing the first lunar mission, IM-1, with Nova-C class lander dubbed Odysseus on February 22nd, LUNR stock jumped nearly 5x to $10.99 per share. The historic nature of the mission, having returned to the Moon after 50 years, reinvigorated public interest.
However, it took NASA’s stronger commitment to kickstart the LUNR stock hype. After all, investors seek a large cushion in such a public-private partnership, considering the expected high capex and lack of profitability short to medium-term. After proving itself with the Odysseus landing, the cushion ballooned with the $4.82 billion Near Space Network (NSN) contract in September.
With funds secured, IM is now targeting February 2025 for its second lunar mission, according to CEO Steve Altemus from Q3 earnings call. As before, IM is fulfilling NASA’s Commercial Lunar Payload Services (CLPS) initiative, worth around $2.6 billion, to build up infrastructure for lunar exploration and economy.
Are Subsequent Lunar Missions More Exciting?
On one hand, the second Moon mission, IM-2, is no longer historic by default, therefore much less likely to give 5x stock returns. On the other hand, IM is supposed to unload NASA’s PRIME-1 drill to the Moon’s South Pole in search of water ice.
This itself is the first on site demonstration of such capability. Depending on results from the drill and mass spectrometer readings, it may once again place LUNR stock in the public spotlight. In turn, this could yield more interest than just returning on the Moon with IM-1.
Likewise, the IM-3 mission in early 2026, is another exciting step forward. This mission will include four NASA payloads, from MAPP rover and data relay satellite(1st out of 5 for NSN) to yet-determined secondary payloads. The Lunar Vertex MAPP rover is expected to travel approximately 2km and deliver 9.3 GB of high-res data per day for 13 Earth days.
If all goes well, this should be the most exciting Moon coverage to date. By the same token, the LUNR stock pricing is exceedingly likely to reflect it. Between these missions, investors should expect IM to capitalize on the hype with stock dilutions to secure capital on top of NASA funds.
How Much Cash Is IM Burning?
In November’s Q3 earnings report, IM reiterated its 3-vector approach to commercialization: delivery services ($116.9M funded), data transmission services (of NSN $4.82B contract), and infrastructure as a service (of $4.6 billion LTVS contract).
The company ended the quarter with a $106.9 million cash balance and $316.2 million in backlog from NASA contracts. Although IM is still stacking operating losses, they are decreasing. Compared to the year-ago quarter, operating loss was nearly halved at $13.7 million vs $24 million.
Intuitive Machines’ Q3 2024 financial results. Image credit: Intuitive Machines
Combined with the recent outsized public offering, IM has ample cash to push through despite having yet to reach a sustainable profitability zone.
The Bottom Line
There is a distinct lack of available human capital needed to complete complex lunar missions successfully. This was demonstrated by the failure of the Japanese moon lander SLIM in January. Although having landed, its power system failed, making the entire mission a bust.
Likewise, Astrobotic’s Peregrine lander burned up in Earth’s atmosphere after the propellant tank ruptured immediately following the launch on January 8th. Therefore, it cannot be overstated how exceptional the IM-1 mission was.
More to the point, even if the upcoming IM-2 mission fails, the scarcity of human capital is unlikely to reshuffle NASA funding cards. In that scenario, the likely LUNR stock dip would only pose an even more exciting market entry for investors.
In the end, LUNR stock exposure is risky, but this is offset by the public interest to hold a piece of lunar exploration history. In the lull periods between IM missions, the company may capitalize on that interest, but investors should expect higher tops with each successful subsequent mission.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
This article was originally published on The Tokenist.
