Where will the stock of intuitive cars be in 3 years?

Intuitive machines (MON -5.96%)a developer of lunar lander and exploration vehicles, went public through a merger with a special purpose acquisition company (SPAC) on February 14, 2023. Shares of the combined company began trading at $10, rose to a record high of $81.99 on February 22. , but is now trading at around $9.

Bulls were initially taken aback by Intuitive Machines’ rosy outlook. But like many other SPAC-backed companies, its stock crashed after it failed to meet those expectations. Rising interest rates have also inflated valuations.

Image source: Getty Images.

At its peak, Intuitive Machines was valued at $1.48 billion, or 18 times the revenue it would generate in 2023. Today, it’s worth just $553 million, or 2.5 times the revenue it they expect to generate them this year.

So could this small-cap space stock explode again and return to all-time highs in the next three years?

How do Intuitive Machines make money?

Intuitive Machines generates most of its revenue from NASA contracts. It originally planned to put its first Nova-C lander on the moon for NASA in 2021, but that launch was repeatedly delayed until it finally landed in February.

This was the first successful US moon landing since 1972 and forced NASA to award the company a new Lunar Terrain Vehicle (LTV) contract in April. The company is also trying to generate ancillary revenue by offering ride-sharing services to non-NASA customers who want to deliver their payloads to the moon.

What happened in the last three years?

In its pre-merger presentation, Intuitive Machines claimed that its revenue would have a compound annual growth rate (CAGR) of 173%, rising from $102 million in 2022 to $759 million in 2024. It believed it could achieve this work by expanding its business beyond three core contracts with NASA and attracting other clients. Unfortunately, the company has missed those estimates by a mile for the past three years.

Data source: Intuitive Machines.

The aforementioned delays to its Nova-C lander appeared to prevent Intuitive Machines from winning any major new NASA contracts in 2022 and 2023 — except for a new contract to assist NASA through a joint venture with the technology and engineering company. KBR. That tepid growth and murky roadmap drove away many of its original investors.

What will happen in the next three years?

However, the successful landing of Nova-C in February and the new LTV contract indicate that NASA will tighten its relationship with Intuitive in the future. In the second quarter of 2024, the company’s contracted inventory increased 55% year-over-year to $213 million.

That’s why Intuitive Machines expects its revenue to grow between 163% and 200% this year. From 2023 to 2026, analysts expect its sales to grow at a CAGR of 82% to $480 million. They anticipate net losses in 2024 and 2025 as Intuitive Machines expands its business, but also expect the bottom line to turn back into the black with a net profit of $16 million in 2026.

That’s a promising outlook, but it depends heavily on management’s ability to honor existing orders, secure new contracts and expand its ride-sharing business. It also faces a lot of competition from aerospace industry leaders such as Lockheed Martin and similar space-focused start-ups such as Firefly Aerospace, Blue Origin and Ceres Robotics.

Intuitive Machines paid off all of its outstanding debt in July, but only had $32 million in cash and cash equivalents at the end of the second quarter. It says that’s enough to fund its operations for at least another 12 months, but it will likely need to take on more debt or issue new shares to keep growing over the next few years. It has already increased its share count by 327% since its public debut, and that rapid dilution could continue for the foreseeable future.

It will remain a high-risk, high-reward stock

If Intuitive matches analysts’ 2026 estimates and still trades at 2.5 times sales, its enterprise value would more than double from its current level to $1.2 billion. If its revenue grows another 30% in 2027 and it maintains the same valuation, it could be worth $1.6 billion. It could generate even bigger gains if investors reevaluate it as a hypergrowth stock.

Intuitive cars probably won’t rise to nine times their record highs in the next three years. But it could still deliver multibagger earnings for patient investors if it expands its business.

That said, it’s still a volatile stock that could fall further if the company loses future contracts or eats up too much cash as it dilutes existing investors.