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Intuitive Machine's New Deal to Boost Growth: Time to Buy LUNR Stock?

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Intuitive Machine Inc. (LUNR - Free Report) has been collaborating with commercial companies and research centers to enhance its footprint in the rapidly growing space exploration industry, particularly in the cislunar space.  Keeping up with this trend, LUNR recently joined forces with the Johns Hopkins University Applied Physics Laboratory (“APL”) to promote safe, secure, and reliable communications and navigation around the Moon. 

The collaboration is aimed at advancing U.S. hardware applications, supporting NASA’s Artemis program, and developing scalable, subscription-based data transmission services, which, in turn, should strengthen Intuitive Machines' dominance in the cislunar space.

This might lure investors interested in space stocks to add LUNR to their portfolio. However, before making any hasty decision, it would be prudent to take a look at how the company has performed at the bourses so far this year, the stock’s growth prospects as well as risks (if any) to investing in the same. The idea is to help investors make a more insightful decision.

LUNR Stock Outperforms Industry, Sector & S&P 500

Intuitive Machines’ shares have surged a massive 453.8% in the year-to-date period against the Zacks Aerospace-Defense industry’s decline of 8.9%. It has also outperformed the broader Zacks Aerospace sector’s growth of 0.3% as well as the S&P 500’s surge of 27.1% in the same period.

Zacks Investment ResearchImage Source: Zacks Investment Research

Other defense players such as Leidos Holdings (LDOS - Free Report) , TransDigm Group (TDG - Free Report) and Lockheed Martin (LMT - Free Report) have also delivered a stellar performance, with their shares surging 51.7%, 24.4% and 14.1%, respectively, year to date.

What Pushed LUNR Stock Up?

Intuitive Machines has been securing notable contracts recently, leveraging its expertise in manufacturing space products and services to support sustained robotic and human exploration to the Moon.

Evidently, in September 2024, LUNR won a $4.82 billion contract from NASA for communication and navigation services for missions in the near space region, which extends from Earth’s surface to beyond the Moon. In August, the company clinched a $116.9 million NASA contract to deliver six science and technology payloads, including one European Space Agency-led drill suite, to the Moon’s South Pole. These demonstrate the achievements of LUNR in capitalizing on the growth opportunities of the expanding commercial lunar economy, which, in turn, must have boosted its share price so far this year.

Will LUNR Stock Continue to Grow?

Intuitive Machines’ growth prospects in the space exploration industry remain solid, considering the immense investments made by both the U.S. government and private companies in space. To this end, it is imperative to mention that the space economy is expected to reach a value worth $1.8 trillion by 2035, as per a report by the World Economic Forum, published in April 2024. 

With America being one of the primary nations spearheading the growth of the global space economy, companies like LUNR should be encouraged to innovate more advanced lunar infrastructural products. Here, it is important to mention that LUNR’s largest lander, the Nova-M, is currently under development and is expected to carry approximately 5,000-7,500 kilograms of payload to the lunar surface. Once this product comes to market, we may expect LUNR to generate solid revenues from it. 

Moreover, the company ended the third quarter of 2024 with a solid backlog of $316.2 million, which improved sequentially from $213 million. Such solid backlog growth further indicates solid revenue generation prospects for Intuitive Machines, which, in turn, should help generate notable earnings growth. 

A sneak peek at its estimates mirrors a similar picture.

Upbeat Earnings Estimates for LUNR

The Zacks Consensus Estimate for LUNR’s fourth-quarter revenues implies a solid improvement of 87.8% from the prior-year quarter’s level, while that for 2024 indicates 189.5% growth year over year. 

The estimated figure for 2025 also indicates a similar picture. Moreover, the upward revision in its fourth-quarter 2024 and first-quarter 2025 earnings estimates indicates analysts’ improving confidence in the company’s bottom-line growth.

Zacks Investment ResearchImage Source: Zacks Investment Research

Zacks Investment ResearchImage Source: Zacks Investment Research

Strong Prospects Justify LUNR Stock’s Premium Valuation

LUNR stock is not at all cheap, as its Value Score of F suggests a stretched valuation at this moment.

In terms of valuation, LUNR’s forward 12-month price-to-sales (P/S) is 6.35X, a premium to its peer group’s average of 4.64X. This suggests that investors will be paying a higher price than the company's expected sales growth compared to that of its peers. The company’s forward P/S also looks stretched when compared to the median of its one-year range, 2.57.

LUNR’s Price/Sales Ratio (F12M)

Zacks Investment ResearchImage Source: Zacks Investment Research

Nevertheless, the strong growth prospect justifies Intuitive Machine’s premium valuation.

Risks to Consider Before Selecting LUNR

Despite the aforementioned growth opportunities, LUNR currently faces certain challenges, which one should consider before investing in the stock. One such challenge is that the company is still in the preliminary stages of developing its full space infrastructure. If it fails to demonstrate the reliability of its products and services through a successful lunar landing or delays completing specific space missions, its results of operations might suffer.

Moreover, the company faces industry-specific headwinds like the shortage of skilled labor, which might lead to a failure in finishing its products in the scheduled time. This might hurt its revenues.

Final Thoughts

To conclude, investors may consider adding LUNR stock to their portfolio, considering its robust share price performance, solid revenue growth prospects, upward revision in earnings estimate and solid liquidity evident from the massive 170.6% sequential improvement witnessed in its cash balance as of Sept. 30, 2024.

The company’s current Zacks Rank #2 (Buy) further supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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