Last week, NASA awarded Intuitive Machines (LUNR) a $4.8 billion contract to provide communication and navigation services between Earth satellites and the moon. This news triggered a massive rally in Intuitive's stock, with shares jumping as much as 77%, though they have since settled around $8, representing a 50% gain.
The contract supports NASA's Artemis project and involves deploying lunar relay satellites, with initial payments of $150 million for satellite development and the remaining $4.8 billion to be earned over 10 years as NASA pays for communication services.
The contract marks a major expansion for Intuitive Machines, transitioning from lunar payload delivery to interplanetary communications. Over the next decade, this deal will significantly increase the company’s annual revenue, with an estimated $480 million per year once fully operational. However, the financial impact will build gradually, as the first phase of development will "only" double current revenues. While this is a huge win for the company, investors need to recognize the long-term nature of the revenue growth.
From my perspective, Intuitive Machines remains a strong buy. Analysts have yet to fully update their projections, and most still don’t account for the additional revenue from this contract. With revenues set to grow faster and profitability likely arriving earlier than expected, I believe there’s significant upside potential. At $8 a share, the stock could be undervalued, especially if earnings reach $1 per share within a few years.
LUNR shares have surged by 49.27% in the past week, outperforming the Zacks Aerospace - Defense industry, which rose by 0.68% during the same period. Looking at a longer timeframe, LUNR's monthly price change of 65.56% also stands out against the industry's 0.63% performance.
Consistency is key in the market, and LUNR seems to be excelling. Intuitive Machines, Inc. shares have notably increased by 118.63% over the past quarter and 123.53% in the last year, surpassing the S&P 500's gains of 5.25% and 36.65% over the same periods.
In addition to performance, investors should consider LUNR's average 20-day trading volume. Volume plays a crucial role in assessing market sentiment; a rising stock with above-average volume is typically positive, while a declining stock with high volume might indicate bearishness. Currently, LUNR maintains an average trading volume of 27,137,876 shares over the last 20 days.
In my view, Intuitive Machines is a promising long-term play. While the market may be slow to fully reflect the impact of this NASA contract, I expect both revenue and profit growth to accelerate over the next several years, making it a great opportunity for investors willing to be patient.
