Investors in start-up moon lander stock Intuitive Machines (LUNR 1.02%) had a rather curious experience last week. Reporting earnings early in the week, Intuitive delivered the shocking news that, instead of losing $0.18 per share (as Wall Street expected), it earned a profit of $0.29 per share. Now, you might have expected news like this to elicit a round of applause from Wall Street.
It didn't.
Or at least, it didn't right away. In fact, Intuitive Machines stock declined about 1.4% on Tuesday after earnings, then fell another 2.2% on Wednesday. It wasn't until Thursday that investors seemed to notice Intuitive Machines' good news and began buying the stock, sending Intuitive Machines shares up more than 13% and wiping out all the losses from earlier in the week.
But could it be that investors' first instinct, to "sell the news," was the right reaction?
NASDAQ: LUNR
Key Data Points
Intuitive Machines Q2 earnings
After all, while Intuitive's "profit" seemed astonishingly good at first, it didn't really hold up to close examination. Parsing the report Thursday, Barron's magazine observed that in reality, the company's surprise profit "boils down to accounting for items such as warrants" and earn-out liabilities -- one-time items unrelated to the company's core business and not indicative of operating strength.
On the contrary, as Barron's pointed out: "Intuitive's operating loss in the quarter amounted to $28.2 million, higher than the $9 million loss analysts had expected." (emphasis added).
Indeed, Intuitive Machines generated $41.4 million in revenue in Q2, but the cost of that revenue (i.e., the cost of building its lunar landers) was $51.7 million. Operating costs added another $12 million to the company's losses, and factoring in other expenses, Intuitive ended up with an operating loss of $28.2 million for the quarter -- twice as bad as its loss one year ago.
What Intuitive Machines really earned
Given all the accounting intricacies on Intuitive Machines' income statement, investors may be better off calculating the company's profitability -- or lack thereof -- by focusing on its cash flow statement. There, we learn that, in the first half of 2024, Intuitive Machines burned through $41.5 million in cash.
That was actually a bit worse than the $36 million in cash burn Intuitive suffered in H1 2023 and suggests the space company is still quite a ways away from any real definition of being "profitable."
Is Intuitive Machines stock a sell?
In fact, according to analysts polled by S&P Global Market Intelligence, Intuitive Machines probably won't generate positive free cash flow or turn generally accepted accounting principles (GAAP) profitable before 2026 at the earliest. At current revenue levels, the company simply doesn't have the scale built up to earn a profit from its business. To hit that mark, most analysts agree Intuitive's business needs to roughly triple in size, from the $160 million or so in annual revenue it's currently generating to something more like $475 million.
Still, that's not necessarily a reason to sell the stock; Intuitive Machines is moving in the right direction.
The company might not have earned a profit in Q2, but it did grow its revenue 130% year over year. Furthermore, management says it's on track to book between $210 million and $240 million in revenue this year -- as much as triple last year's revenue.
Also encouraging is the fact that Intuitive Machines paid $21.5 million in Q2 toward the costs of sending its IM-1 lunar lander to the moon and prepaying for moon trips for its IM-2 and IM-3 landers as well. In summary, management declared the "majority of launch provider payments [is] now behind us." Looking ahead, management is confident it has sufficient cash left "to fund operations through the next 12 months."
This also means that the cash burn that was so alarming in H1 should diminish as the year wears on, and as Intuitive Machines collects payment for the moon missions that lie ahead of it -- including $18 million it will collect for providing "rideshare" services to other companies and organizations hitching a ride to the moon on its landers.
Long story short: Intuitive Machines will probably need to sell more shares and raise more cash before becoming profitable in 2026. The more positive press it can generate between now and then, though, the higher its share price should move -- and the more cash it will get for any shares it needs to sell.
That gives investors one more reason to hope for a successful IM-2 mission later this year.
