What's the idea?
As commercial interest in space exploration grows, NASA has approved a new lunar program, Artemis, that relies on private funding. Intuitive Machines is one of NASA's key contractors in this program. The company provides services to deliver useful cargo to the Moon, which is particularly relevant in the context of the planned human landing on the Earth's natural satellite in 2026.
Due to China's rapid progress in lunar exploration, the US may increase its spending on the Artemis program. In September 2024, Intuitive Machines won a major $4.82 billion contract to establish a permanent link between the Moon and Earth.
The company continued to raise funds from private contractors and successfully sold all available space for cargo to be delivered to the Moon on the second IM-2 mission. Intuitive Machines is planning two flights to the Moon in 2025. If these are successful, the company's market capitalisation could increase significantly.
About Company
Intuitive Machines, Inc. (LUNR) is a leading player in the market for space exploration beyond Earth's orbit. The company is one of NASA's prime contractors for the Artemis mission to colonize the Moon and Mars. Founded in 2013, Intuitive Machines is headquartered in Houston, Texas, USA.
Why do we like Intuitive Machines Inc?
Reason 1. Renewed interest in lunar missions
Intuitive Machines is currently one of the leading players in the market of space exploration beyond Earth's orbit. The company is one of NASA's main contractors in the realization of the Artemis mission.
Intuitive Machines' business is divided into four segments:
Lunar Access Services is the flagship segment of the company, around which its entire business is built. The main prerequisite for the delivery of payloads into space is the use of launch vehicles. However, the delivery of cargo to other celestial bodies also involves the use of landing modules. And while mankind has made great progress in the field of launch vehicles, the development of engines for landing modules is still at a not very advanced stage. As part of the Lunar Access Services segment, the company has developed and manufactures the Nova-C engine, which is capable of landing payloads weighing up to 100 kg. The first example of a successful landing took place in February 2024. As part of this segment, Intuitive Machines is also developing other landing engines with larger payloads and providing payload delivery services to the Moon using Nova-C.
Orbital Services — in this segment, the company develops technologies to deliver satellites to a given location, maintains satellites and space stations up to their refueling, and participates in satellite repositioning and orbital debris removal projects.
Lunar Data Services — through this segment, Intuitive Machines provides services to ensure communication between the Earth and the Moon, which is one of the key elements of lunar exploration. In particular, the company is developing a partnership with Nokia Corporation for this purpose.
Space Products and Infrastructure (space products and infrastructure) — through this segment the company manufactures equipment and machinery for the exploration of the planets nearest to the Earth (unmanned aerial vehicles, lunar rovers, living modules, etc.).
Due to the high demand for Intuitive Machines' products and services for space exploration, the company is demonstrating rapid revenue growth, which for H1 2024 alone exceeded the revenue generated by the company for the entire year 2023. The graph below shows the dynamics of this indicator.
Intuitive Machines revenue trends (no revenue in 2021)
It is worth noting that the "excitement" around the development of space objects closest to the Earth has resumed relatively recently. Everyone remembers the historical scientific breakthroughs associated with the launch of the first satellite, and then the delivery of Yuri Gagarin to orbit the Earth and Neil Armstrong to the Moon. However, these events were consequences of the space race between the US and the USSR. By the end of the 1960s, both countries had reached the limits of what they could achieve, and the battle for supremacy in new, high-profile space discoveries was waning. The termination of funding for the US Apollo program in 1971 postponed further exploration of the Moon for decades. The main reason for this was the lack of applied nature of the mission: it required significant expenditure and its impact was purely scientific and image-building.
The situation changed radically in 2017, when NASA approved a new ambitious lunar exploration program, Artemis. The program aims to resume missions to Earth's natural satellite and eventually human exploration of Mars. Unlike the Apollo program, Artemis relies not only on government funding, but also on the participation of the private sector, which today has many more reasons to invest in space than it did in the days of Apollo.
For example, according to Mckinsey, in the near future the volume of the "space" economy, i.e. creating specialized space-based products and services to improve the performance of businesses on Earth, will grow rapidly. This trend is driven by the desire of individual companies to scale "terrestrial" services (communications, energy, etc.) to the level of Earth orbit, the Moon, and into farther space. Another reason for business interest in space research is the possibility of creating fundamentally new products in extraterrestrial conditions. For example, for the 2nd Intuitive Machines lunar mission, in addition to NASA, Columbia, Nokia, Dymon, Lonestar, Arizona State University, Lunar Outpost, Puli Lunar Water Snooper, German Aerospace Center and Aegis Aerospace have reserved seats in the company's vehicle.
McKinsey forecasts this market segment to grow from $300 billion to $1.04 trillion from 2023 to 2035, assuming a compound annual growth rate (CAGR) of 10.87%.
Growth of the "space" economy
According to NASA's Office of the Inspector General for Audit, NASA's total spending on the Artemis program is expected to reach $93 billion by fiscal year 2025. The goal of the program is to land a man on the moon in 2026 and establish a sustained presence by the late 2020s through the establishment of an equipped, habitable base camp.
Part of Artemis is the $2.6 billion CLPS (Commercial Lunar Payload Services) program, in which Intuitive Machines plays a major role. The company is gradually getting contracts to deliver scientific instruments to the Moon to collect data in preparation for a human landing, as well as to deliver support equipment to ensure a human presence on the Moon. However, the majority of the company's funding is just yet to be secured as further lunar launches take place.
In addition to Artemis and CLPS, there are also the Lunar Gateway and Tipping Point projects, which open up a wider target market for Intuitive Machines. Lunar Gateway consists of three phases that will create a space station in near-lunar orbit, scheduled for launch in 2025. Tipping Point is a NASA program aimed at finding space technologies that can help develop the commercial potential of space and attract more private companies to explore it.
Speaking about the reasons for the renewed US interest in lunar missions, one should also note the tendency to unleash a new space race, which is now driven not by image reasons, but by national security.
As stated in the US Defense Intelligence Agency's 2022 report entitled ‘Security Challenges in Space’, "China and Russia value superiority in space. As a result, we expect them to look for ways to strengthen their space and counterspace programs, as well as ways to better integrate them into their militaries." For this reason, the US Department of Defense, through its member space forces, has stepped up investment in space products.
US attention to what other countries are doing in space is understandable: China's Chang'e-5 lunar program is gaining momentum. In 2020, Chang'e-5 successfully delivered samples from the moon. Three more Chang'e-5 missions are planned over the next five years to create products using lunar materials. In addition, in June 2024, China returned the first-ever samples of materials from the back side of the Moon. These achievements are part of China's larger ambition to become the dominant space power.
As such, the US may fear that China's activities on the Moon will go beyond science, which underscores the importance of accelerating the goals set by Artemis.
Thus, unlike the Apollo mission in the 20th century, which relied on government funding and was abandoned, the Artemis launch comes at a time when the private sector has gained opportunities to use space for market expansion and is therefore willing to invest in its exploration. In addition, the growing importance of space for warfare and maintaining security has led to increased government spending on space exploration. The combination of these two factors — corporate investment in space and national security — are important drivers of revenue growth for Intuitive Machines as a private and public sector contractor.
Reason 2. New contracts
As noted above, Intuitive Machines has become a beneficiary of the 21st century space race. This has a positive impact on the business and financial results of the company, which not only fulfills one-off contracts, but also demonstrates its ability to attract more and more funding by increasing its backlog (the volume of orders received but not yet completed).
At the end of Q2 2024, Intuitive Machines increased this figure by 55.09% to $212.98 million from $137.33 million in the same quarter of 2023. The company's backlog is likely to show even more growth in the next quarter due to a huge new contract with NASA in September 2024, worth up to $4.82 billion, which requires the company to build a communications network called the Near Space Network within the boundaries of near space. The term Near Space Network refers to the space from the Earth to the Moon.
To accomplish this task, Intuitive Machines will deploy a group of transponder satellites in lunar orbit, which will allow for constant communication between the Moon and Earth. This project is one of the cornerstones of the Artemis mission, because without stable communications, it will be impossible to place astronauts on the closest celestial body to Earth.
The contract will provide a maximum of $4.82 billion in funding over five years. The agreement provides for an option to extend the cooperation for another five years. For comparison, Intuitive Machines' revenue for the full year 2023 amounted to $79.52 million. On the back of this news, the company's shares rose by 45%.
Stock Dynamics
The new contract with NASA was a record-breaking one for Intuitive Machines and allowed it to significantly strengthen its role as one of the main contractors of the Artemis mission. The company is now responsible not only for the cargo delivery portion of Artemis to the Moon, but also for providing communications between the Earth and its satellite.
It is also worth noting the contract signed between Intuitive Machines and NASA at the end of August 2024 for the delivery of additional cargo to the Moon as part of the company's second lunar mission. The contract, worth over $115 million, was the fourth of its kind and involved the delivery of six science and technology payloads: five from NASA and one from the European Space Agency. With a third mission to the moon planned by the company for 2025, it can be expected that Intuitive Machines has already started to receive funding under this contract, which will positively impact its revenue in the near future.
In addition, as noted by the company's management at the Q2 2024 investor conference call, the contract to build and deliver the VIPER vehicle to the Moon, which was suspended by NASA due to funding issues, may be renewed. Management noted that the lunar rover delivery is planned as part of future Intuitive Machines missions using the 500–2,500 kg Nova-D heavy landing module currently under development.
NASA recently clarified that it may resume the contract if Intuitive Machines finds additional customers to share the cost of the mission with the government agency. With VIPER weighing 500 kg, the company needs to sell seats to carry at least another 1,000 kg of payload. With the Nova-D landing module mission still in the planning stages, Intuitive Machines has plenty of time to find new customers, so the chance of renewing the NASA contract increases.
Thus, Intuitive Machines continues to attract major contracts for services and products as part of the Artemis mission realization. The major satellite-to-Earth communications contract for $4.82 billion has brought the company to a new level of development and will allow it to significantly increase its financial results in the near future.
Reason 3. Upcoming launches of new missions
As noted above, in February 2024, Intuitive Machines soft-landed an American spacecraft as part of the IM-1 mission. The probe landed farther south than any other spacecraft that has ever soft-landed on the Moon.
The company plans to conduct two more similar missions: IM-2, whose seats have been fully contracted by the beginning of the Q3 2024, and IM-3. After the successful realization of the remaining missions, Intuitive Machines plans to move on to regular missions to the Moon, several missions per year. By that point, the company is expected to have developed landing modules with a higher payload engine, which will be key to realizing the Artemis mission's goals of transporting astronauts and their living modules to the Moon.
The company's current plans call for the spacecraft for the IM-2 mission to be delivered to the launch pad in late 2024, with launch taking place in early Q1 2025. The mission will aim to land on the Moon's South Pole. As of the end of June 2024, the total value of seats contracted by NASA and a number of commercial customers in the IM-2 mission was estimated at $122.4 million.
The IM-3 mission is scheduled to launch in the early Q4 2025 and will aim to land near the Ocean of Storms, a plateau in the Western Hemisphere of the Moon, closer to the North Pole. Intuitive Machines had already received all the necessary equipment and as of August 2024 was preparing to begin assembling the vehicle. At the end of Q2 2024, the total value of seats contracted by NASA and a number of commercial customers in the IM-3 mission was estimated at $86.9 million.
As noted earlier, all three IM missions utilize the Nova-C landing module equipped with the VR900 LOX/Methane engine. This device is the product of Intuitive Machines, which independently and completely manufactures the engine by printing its parts on a 3D printer.
Having proven the effectiveness of the Nova-C in practice, the company has begun development of two platforms with higher payloads: the Nova-D and Nova-M. Intuitive Machines expects the Nova-D, equipped with the VR3500 engine, to have a payload capacity of between 500 and 2,500 kg. It is important to note that the development of the landing module has already passed the SDR (System Definition Review) stage, i.e. the project has proven its feasibility and realizability. At the same time, the VR3500 engine itself was first tested back in 2020, when it was able to operate continuously for more than 600 seconds. Work on the engine is currently ongoing.
The Nova-M platform will not be brand new. It will also use the VR3500 engine, but in two pieces at once, which will allow it to provide a payload of 5,000–7,500 kg. As noted by management at the last teleconference, Intuitive Machines will soon be looking for companies willing to contract to deliver payloads to the Moon on future Nova-D missions.
Thus, Intuitive Machines is currently preparing to launch two spacecraft to land on the Moon by the end of 2025. If successful, the company will be able to carry out several lunar missions a year from 2026, which could lead to a significant increase in the market value of its shares.
Financial performance
Intuitive Machines' financial results for the trailing 12 months (TTM) can be summarized as follows:
- Revenue totaled $157.77 million, a 98.40% increase over 2023.
- Adj. EBITDA decreased from -$49.62 million to -$51.13 million.
- The net loss was -$39.38 million compared to a profit of $60.46 million at the end of last year.
The increase in revenue is mainly due to new contracts with NASA and commercial companies related to the delivery of cargo for lunar missions, which also favorably impacted Intuitive Machines' H1 2024 results. The decrease in earnings is mainly due to costs associated with the issuance of securities.
Dynamics of the company's financial indicators
Intuitive Machines' results for H1 2024 are summarized below:
- Revenue increased 215.98% YoY to $114.48 million.
- Adj. EBITDA decreased from -$25.34 million to -$26.84 million.
- Net loss was -$80.67 million versus a profit of $19.18 million a year earlier.
Dynamics of the company's financial results for H1 2024
- TTM operating cash outflows rose to -$67.21 million versus -$45.28 million at the end of 2023.
- Free cash outflow increased to -$80.71 million from -$75.19 million.
The increase in operating and free cash outflows is mainly due to a decrease in working capital.
Company cash flow
The company's balance sheet can be characterized as healthy:
- The total debt is $37.44 million.
- Cash equivalents accounted for $31.63 million.
This level of debt load indicates good financial stability of the company.
Intuitive Machines expects significant revenue growth through 2024 to $240 million, which implies more than double YoY growth. Thus, the management forecast adds confidence in the company's value growth potential.
Stock valuation
Intuitive Machines trades at a discount based on EV/Sales of 3.54x compared to other companies in the space exploration industry. At the moment, the shares of Intuitive Machines' main competitors are not listed on the stock exchange. Moreover, the company is practically a monopoly as its industry is just starting to develop. The absence of other multiples is explained by the fact that Intuitive Machines is just starting to achieve positive operating profit and margin expansion.
Comparable estimate
The average price target from the top-5 Wall Street investment banks is $10.6 per share. According to our consensus, the company is undervalued by historical multiples: the stock’s fair market value is $12, which implies a potential upside of 63%.
Price targets of investment banks
Key risks
Crash risk. If one of Intuitive Machines' two upcoming missions fails, this could lead to a reduction in the company's capitalisation.
Possible lack of solvent demand. Although Intuitive Machines is actively developing lunar landing modules with higher payloads, the company needs to find enough customers to send their cargo to the Moon. If this does not happen, Intuitive Machines may need more time to realize its ambitions.
Possible cancellation of the Artemis mission or significant extension of its timeline. NASA had originally planned a new human landing on the Moon in 2024, but due to shifts in the schedule, the mission is now planned for 2026. In the event of further extensions or a complete cancellation of the program, the company's financial results could deteriorate.