Image courtesy of 123rf.com

Despite a 2.1% correction over the last 30 days, the S&P 500 (SPX) index is still strong. At 4.53, its price-to-book (P/B) ratio remains at the level of the dot-com bubble burst of March 2000.

Yet, Intuitive Machines (LUNR) stock is still strengthening, gaining 46% value in the same market correction period. In December’s deep dive coverage of the lunar exploration company, LUNR shares were priced at $12.17, having gone to present $21.48 per share. 

Such resilience speaks to the unique qualities of Intuitive Machines. In turn, investors should see LUNR as an essential exposure to the space sector. Here are the three main reasons why that is the case.

1. Nobody Else Is Doing It (As Successful)

Although NASA successfully landed a vehicle on the moon’s surface in July 1969, the following decades were met with failures and partial failures. From Indian Chandrayaan-2 and Israeli Beresheet to Russian Luna-25 and Japan’s Hakuto-R, they all stumbled in this complex endeavor.

Yet, Intuitive Machines’s robotic Nova-C lander completed all the stages in February 2024: launch, entering orbit, landing, and deployment of payload instruments. Although this was not a historic milestone per se, it was in the sense that it opened up the road to commercialization of the lunar surface and orbit.

After all, the first human landing happened within unique geopolitical circumstances, which were more about political showboating. As such, it lacked the proper staying power. NASA’s renewed Artemis program is more collaborative and economic, so the space agency outsourced it to Intuitive Machines and SpaceX.

2. Security In Government Funding

Demonstrating technical and organizational expertise to achieve a successful lunar landing is one main driver for LUNR stock valuation. Another issue is the steady flow of cash from US taxpayers. On top of its previous funding backlog, Intuitive Machines hit the mother NASA contract. 

The Near Space Network (NSN) contract is worth up to $4.82 billion, awarded to the company in September 2024.

After the first five-year period, another optional period of the same scope exists. Based on Intuitive Machines’ performance in delivering robotic landers, direct-to-Earth (DTE), and cislunar (space between Earth and Moon) communication services, the company has flexibility for indefinite delivery and indefinite quantity orders.

Building up the supporting lunar infrastructure will keep the company busy for at least up until September 2034. In the meantime, IM has a $316.2 million backlog, as reported in November’s Q3 2024 earnings filing. This excludes the upcoming $150 million for initial flow from the NSN contract. 

The company ended the quarter with $89.6 million in cash balance, the highest in its reporting history. Although the net loss of $80.4 million was steep, it was offset by a positive gross margin that improved profitability by $4.1 million.

3. Mission Hype and Stock Volatility

As Bitcoin investors know well, price volatility is a great asset. Traders can easily exploit it by buying low and selling high within shorter time frames. While Bitcoin traders count on BTC’s decentralized nature and scarcity to be confident, LUNR traders can count on secured government funding and long interim space between missions.

Ahead and after IM lunar missions, LUNR stock is poised for price swings depending on the outcome. As a part of NASA’s Commercial Lunar Payload Services (CLPS), Intuitive Machines is approaching its IM-2 mission on February 27th to deliver Pa RIME-1 drill mounted on the lunar lander.

If successful, the mission will gauge the viability of Moon’s exploration by measuring resources for in-situ utilization (ISRU). In turn, this will be another hype-jumping point for LUNR stock. Even better, if some part of the mission fails or is botched entirely, this would provide an enticing buy-the-dip opportunity.

After all, in such a scenario, it is exceedingly unlikely that NASA would veer off the course from its relationship with Intuitive Machines, given the scarcity of human capital in this sector. 

The Bottom Line

With the absence of SpaceX as a publicly traded company, Intuitive Machines is one of the few space stocks available that captures the public spotlight. The lunar exploration company is unlocking the technology needed to make the Moon more than just a tool for geopolitical jousting.

At a trailing price-to-earnings ratio (P/E) of 9.20, LUNR stock returned 866% value to investors over a one-year period. The current high price of $21.48 reflects the upcoming IM-2 mission in February. It is significantly above the average LUNR price target of $16.70 per WSJ forecasting data. 

However, given the stock’s resilience during the December market correction, it is likely that more investors will see it as the main space stock exposure. However, for high stakes, it would be prudent to wait after the IM-2 hype dies down following February. At this protracted, less exciting period, the LUNR price should be more approachable. 

More By This Author:

Cerence AI Stock Soars 95%+ Following Nvidia Partnership Announcement
Huawei’s Resurgence Hits Apple As Foreign Phone Sales Drop 47% In China
Carvana Under Fire: Hindenburg Report Alleges Accounting Manipulation