You’ve heard the news by now: Last week, NASA won an award Visual machines (NASDAQ: LUNR) A contract to provide “Geographic Relay Services to Cislonar,” which relays communications from Earth satellites (in Geosynchronous Orbits, or GEO) to the Moon and back. This contract, which was concluded on Wednesday last week, created a spark huge The stock price of Intuitive Machines surged, at one point up 77 percent.
The stock gave back some of its gains as investors lucky enough to own it before the news broke cashed in. But at the recent share price of $8, the gains are still significant: almost 50%.
Here is what you might no Know (yet), though: even after that 50% increase, this space stock is a bargain.
What Intuitive Machines won
The NASA contract hires Intuitive Machines to “deploy lunar relay satellites and provide communications and navigation services” in support of NASA’s Project Artemis to return astronauts to the moon. Steve Altmus, CEO of Intuitive, explained that the company expects to pay $150 million initially to develop the communication satellites.
The bulk of the contract, worth $4.8 billion, will be completed after the satellites are launched and NASA begins paying Intuitive to provide communications services between GEO and the Moon. NASA will pay the company “by the minute to be on the network, something like one million minutes per year … for data transfer and navigation services.”
So you can think of this as a kind of intragalactic mobile internet plan, with Intuitive acting as a space ISP for NASA. Ultimately, it will take approximately 10 years for Intuitive to earn the entire $4.8 billion award, with an initial five-year contract through September 30, 2029, and an optional five-year contract (hopefully) at the end. including the extension of the contract until September 30, 2034.
What does this mean for investors?
For investors wondering if they missed the train on Intuitive Machines, these dates are important.
Over the course of a 10-year deal, the $4.8 billion averages out to an additional $480 million per year in annual revenue — roughly four times Intuitive’s current $158 million annual revenue stream. But the first phase of development of this contract will “only” almost double the company’s revenue.
It’s still a big win for Intuitive Machines (and, as I discussed last week, it’s indicative of the company’s expanding business scope, from lunar cargo delivery to interplanetary communications). However, the gains are not achieved all at once, but spread out and grow gradually over a decade.
Why Intuitive Machines Stock Is Still a Buy
Does the fact that revenue from the deal will grow only incrementally mean that investors overreacted last week by buying shares of Intuitive Machines?
The opposite is more likely. Despite the fact that at $8 a share today, Intuitive Machines stock is double the $4 or $5 a share it has averaged over most of the past year, I think the stock could still be a decent price today. have
Here is why.
Before the deal was announced, most analysts polled by S&P Global Market Intelligence didn’t expect Intuitive Machines stock to turn a profit until 2026. It believed that the cargo business would need about $475 million in annual sales to become profitable. $0.25 earnings per share, and Intuitive Machines will need a few more years to reach that earnings goal.
Oddly enough, despite news of the Relay Services contract being almost a week old, most analysts still have not updated their forecasts for Intuitive Machines stock. They haven’t added $150 million in additional satellite development revenue to their 2025 projections. have not added every Additional revenue for Intuitive Machines selling “million minutes” to NASA by 2027.
And that simply means that Wall Street’s forecasts for Intuitive Machines’ sales and earnings are wrong. Not only will revenues grow faster than analysts predict, but profitability will likely come in faster than expected. Maybe not as soon as next year – but also maybe yesAs soon as next year
And those profits are likely to grow faster than forecasts suggest.
Although we’ll probably have to wait for Intuitive Machines’ earnings call in November for more details on how this will work, it’s not too early to start speculating. So, here’s the math behind my napkin: Let’s say Intuitive Machines earns double the earnings it’s currently projected to store in 2027, when earnings per share are forecast to be $0.49. In this case, it is not unreasonable to think income It could be twice as much as expected that year — roughly $1 a share.
If my estimate here is even close to correct, paying $8 per share today for a stock that might earn $1 per share three years from now sounds like a pretty good deal to me.
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Rich Smith has no position in any of the listed stocks. The Motley Fool has no positions in any of the stocks listed. The Motley Fool has a disclosure policy.
NASA’s $4.8 billion contract to send intuitive machines to the moon was published by The Motley Fool.
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