NASA’s $4.8 billion contract sent stocks of intuitive machines to the moon

By now you’ve heard the news: Last week, NASA awarded Intuitive machines (MON 10.03%) a contract to provide “GEO to Cislunar Relay Services” that will relay communications from Earth satellites (in geosynchronous or GEO orbits) to the Moon and back. The contract, which was awarded on Wednesday last week, sparked a massive the rise in Intuitive Machines’ stock price, which at one point was up 77%.

The stock gave back some of its gains as investors lucky enough to own it before the news broke cashed in their profits. But at a recent share price of around $8, gains remain significant: around 50%.

Here’s what you could not you know (yet), though: even after that 50% gain, this space stock is a bargain.

Which Intuitive Machines won

The NASA contract hires Intuitive Machines to “deploy lunar relay satellites and provide communications and navigation services” to support NASA’s Project Artemis to return astronauts to the Moon. Commenting on the award, Intuitive CEO Steve Altemus explained that the company expects to be paid $150 million initially for the development of the communications satellites.

The bulk of the $4.8 billion contract will come later, once the satellites are launched and operating and NASA begins paying Intuitive to provide communications services between GEO and the Moon. NASA will pay the company for “network minutes, about one million minutes per year … for data transmission and navigation services.”

So you can best think of it as a kind of intragalactic cell phone internet plan, with Intuitive playing the role of space ISP for NASA. Ultimately, it will take about 10 years to earn the entire $4.8 billion award, with the initial five-year contract through September 30, 2029, and an optional five-year contract (hopefully) at the end. from this, extending the duration of the contract until September 30, 2034.

What does this mean for investors?

For investors wondering if they’ve missed the train on Intuitive Machines, that data is important.

Over the course of a 10-year deal, the $4.8 billion averages additional annual revenue of $480 million per year — about four times Intuitive’s current annual revenue stream of $158 million per year year. But the first phase of development of this contract will “only” roughly double the company’s revenue.

It’s yet another giant win for Intuitive Machines (and as we argued last week, it marks an expansion of the company’s business from lunar cargo delivery to interplanetary communications). However, the wins will not come all at once, but rather will be spread out and build gradually over the course of a decade.

Why Intuitive Machines Stock Is Still a Buy

The fact that revenue from this contract will only grow incrementally, however, does that mean that investors overreacted to Intuitive Machines last week’s auction of the stock so much?

The opposite is more likely. Despite the fact that at $8 a share today, Intuitive Machines stock is worth twice as much as the $4 or $5 a share it has been for most of this year, I think the stock may actually be a bargain and today.

Here’s why.

Before the contract was announced, most analysts surveyed by S&P Global Market Intelligence did not expect Intuitive Machines stock to become profitable before 2026. That was based on the belief that the monthly payload business would need about $475 million in annual sales to make a Profit of $0.25 per share and that Intuitive Cars would need several more years to reach its revenue target.

Curiously, despite news of the Relay Services contract being about a week old, most analysts still have not updated their forecasts for Intuitive Machines stock. They didn’t add the additional $150 million in satellite development revenue into their 2025 projections. They didn’t add any additional revenue for Intuitive Cars selling NASA “a million minutes a year” over their projections by 2027.

And what that means, simply, is that Wall Street’s forecasts for sales and earnings of intuitive cars are wrong. Not only will revenue grow faster than analysts project, but profitability will come in faster than expected. Maybe not next year — but maybe Yesas soon as next year.

And those profits will likely grow faster than projections show.

While we’ll likely have to wait for Intuitive Machines’ November earnings call to learn details about how management thinks this will play out, it’s not too early to start making educated guesses. So here’s my behind-the-napkin math: Let’s say Intuitive Cars posts twice the revenue it’s currently expected to post in 2027, when earnings are forecast to be $0.49 per share. In this case, it is not unreasonable to think income it could be twice the expected amount that year as well — about $1 a share.

If my estimate here is even close to correct, paying $8 per share today for a stock that could earn $1 per share three years from now seems like a pretty good deal to me.