A $4.8 billion NASA contract sent a supply of intuitive machines to the moon

You’ve already heard the news: NASA awarded last week Intuitive Machines (LUNR 10.03%) contract for the provision of “GEO to Cislunar Relay Services”, which will transmit communications from Earth satellites (in geosynchronous orbits, GEO) to the Moon and back. The signing of the contract on Wednesday last week caused a storm massive increase in the price of Intuitive Machines shares, which at one point increased by 77%.

The stock gave back some of its gains as investors who were lucky enough to own it before the news broke cashed in on their gains. However, with the stock recently trading around $8, the gains remain significant: about 50%.

Here’s what you can do NO however, we know (yet): even after this 50% increase, these space resources are a bargain.

What Intuitive Machines won

Under the contract, NASA is hiring Intuitive Machines to “deploy lunar relay satellites and provide communications and navigation services” in support of NASA’s Artemis project to return astronauts to the Moon. Commenting on the award, Intuitive CEO Steve Altemus explained that the company expects to initially receive $150 million for the development of communications satellites.

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

So you can think of it as a sort of intragalactic mobile internet plan, with Intuitive acting as the space internet service provider for NASA. Ultimately, it will take Intuitive about 10 years to earn the full $4.8 billion award, with the initial five-year contract running through September 30, 2029, and an optional five-year contract (hopefully) extended at the end including a contract extension through September 30 2034.

What does this mean for investors

For investors wondering if they’ve missed the Intuitive Machines train, these dates are important.

Over the course of the 10-year contract, the $4.8 billion average annual revenue is $480 million, roughly quadrupling Intuitive’s current annual revenue stream of $158 million per year. But the first, development phase of this contract will “only” be approximately twice as large as the company’s revenues.

This is still a monumental victory for Intuitive Machines (and, as I argued last week, it represents an expansion of the company’s focus from delivering cargo to the moon to interplanetary communications). However, the wins won’t all come at once, but rather will be spread out and grow gradually over the course of a decade.

Why is Intuitive Machines stock still worth buying?

But does the fact that revenues from this contract will only grow gradually mean that investors overreacted by listing so much of Intuitive Machines stock last week?

The opposite is more likely. Despite the fact that Intuitive Machines stock, at today’s price of $8 per share, is trading at twice the price of $4 or $5 per share on average for most of this year, I think the stock could still be trading at a bargain price today.

Here’s why.

Before the deal was announced, most analysts surveyed by S&P Global Market Intelligence did not expect Intuitive Machines stock to become profitable before 2026. This was based on the belief that the lunar payload business would need about $475 million in annual sales to break even. earnings per share of $0.25, and it will take several more years for Intuitive Machines to reach its revenue target.

Interestingly, most analysts have been talking about the relay services contract for about a week now Still has not updated its outlook for Intuitive Machines stock. They did not include an additional $150 million in revenue from satellite development in their 2025 forecasts. They didn’t add it everyone additional revenue for Intuitive Machines selling “one million minutes a year” to NASA as they projected through 2027.

This simply means that Wall Street’s forecasts for Intuitive Machines’ sales and earnings are wrong. Not only will revenues grow faster than analysts forecast, but profitability is also likely to emerge sooner than expected. Maybe not as soon as next year, but maybe Yesnext year.

And these profits will probably grow faster than forecasts indicate.

While we’ll likely have to wait for Intuitive Machines’ November earnings call to learn the details of what management thinks it will look like, it’s not too early to start making educated guesses. Here’s my simple math: Let’s assume that Intuitive Machines is seeing twice the revenue it’s currently projected to achieve in 2027, when it’s projected to have earnings per share of $0.49. In this case, it is not unreasonable to think profits could be double the expected amount this year as well – about $1 per share.

If my estimates are even close to correct, paying $8 a share today for a stock that could yield $1 a share three years from now sounds like a pretty good deal to me.