Am a value investor. That means two things: First and most obviously, I like stocks that are selling at reasonable prices relative to their growth prospects. And second, I'm very suspicious of buying high-growth stocks that are “going up” a lot: stocks like Intuitive machines (NASDAQ: LUNR).
Why Intuitive Machines Stock Is Going to the Moon
Two weeks ago, if you remember, Intuitive Machines launched a Nova-C-class lunar lander called Odysseus headed for the moon. Last Thursday, Odysseus made a near-successful soft landing on the Moon — the first American spacecraft to accomplish this feat in more than 50 years.
As soon as this news was announced, Intuitive Machines stock shot up 25% higher. And now, I'm seriously thinking about buying Intuitive Machines stock for myself.
The value investor's dilemma
Why would you consider doing this and seemingly breaking a fundamental rule of value investing in the process? Well, let me first explain to you why it might No buy Intuitive Machines stock.
Intuitive Machines went public amid the SPAC space frenzy in February 2023. IPOing at $10 a share, the stock surpassed $80 in a matter of days, before turning around and giving back all of its gains. . In April 2023, the stock again traded below its IPO price, and didn't return to that IPO price until just this month.
But what an exciting month it has been!
From February 7, about a week before the launch, to February 21, a few days after the launch took place, Intuitive Machines stock nearly tripled in price, going from just $3.50 per share to more of 10 dollars. Pulling back a bit as investors held their breath and waited for the landing attempt, Intuitive Machines rose 16% on Friday, closing the week just below $10 per share. And then on Monday, shares gave back many of those gains, falling to just over $6.25.
At its last recorded stock price, Intuitive Machines is selling for less than double trailing sales, which sounds cheap. The problem is that the company continues to accumulate operating losses (negative $37 million in the last 12 months), burn cash (negative $25 million in free cash flow) and, according to data from S&P Global Market IntelligenceIt is expected to continue losing money and burning cash for at least the next four years.
Is Intuitive Machines Stock a Buy?
But what if it isn't?
Few value investors would give a stock like Intuitive Machines a second look. It's burning cash. Today it is not profitable. Not (supposed to be) profitable in the short term. It lacks an ultimate price/earnings ratio or even a forward P/E ratio on which to value shares.
And yet, this small space company just became the first American company to land a spacecraft on the moon. Of course, the landing was not a 100% success. Post-landing reports indicate that Odysseus probably landed on his side, tripped on a rock, and fell. Intuitive Machines will definitely want to modify future attempts to prevent this from happening. Objections about landing quality aside, Intuitive Machines remains unique among space companies. It is also in an exceptionally advantageous position to continue winning contracts from NASA and other companies that want to deliver payloads to the moon, especially as it fixes the bugs in its landing procedure.
In fact, over the next 10 months, Intuitive Machines plans to launch and land two more spacecraft on the Moon for NASA. Its 2024 revenue is likely to nearly quadruple compared to 2023, and forecasts for the peripheral years, not yet factored into the effects of last week's lunar success, are likely conservative relative to the contracts Intuitive Machines could win now. If revenue grows fast enough, there's a chance Intuitive Machines could become profitable sooner than anyone thinks.
While there's no guarantee the stock is a winner, with a valuation of less than 2x sales, which is on the lower end of what space stocks have been selling for lately, I think Intuitive Machines stock is the cheap enough to buy.
Yes, even for value investors.
Should I invest $1,000 in Intuitive Machines right now?
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rich blacksmith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
This small space reserve tripled in 2 weeks and then fell. Is it still a purchase? was originally published by The Motley Fool
