Space company claims that they have enough funds to last for at least a year.

Investors who have invested in stocks of a start-up company focused on lunar landers Intuitive Machines refers to a company specializing in innovative technology solutions. ( LUNR 33.41% ) I had an interesting experience last week. Intuitive reported its earnings at the beginning of the week and surprised everyone by announcing that instead of a projected loss of $0.18 per share, it actually made a profit. profit At a price of $0.29 per share. One would anticipate that such news would be well-received by the financial community on Wall Street.

It didn’t.

Initially, there was no immediate positive impact on Intuitive Machines’ stock. Following a 1.4% decline in stock value on Tuesday and a further 2.2% drop on Wednesday post-earnings report, it wasn’t until Thursday that investors responded to the positive news about Intuitive Machines. Consequently, they started purchasing the stock, resulting in a more than 13% increase in share price, which completely offset the previous losses incurred earlier in the week.

However, is it possible that investors’ initial response to “sell the news” was actually the correct one?

Intuitive Machines’ second-quarter financial results

In the beginning, Intuitive’s “profit” appeared to be remarkably impressive, but upon further scrutiny, it did not stand up to careful analysis when reviewing the report on Thursday. Barron’s The magazine noted that the company’s unexpected profit can be attributed to the accounting treatment of certain items like warrants and earn-out liabilities, which are non-recurring and do not reflect the company’s operational performance or strength.

Conversely, Barron’s It was highlighted that Intuitive incurred an operating loss of $28.2 million in the quarter. higher instead of the $9 million loss that analysts had anticipated.” emphasis added ).

In the second quarter, Intuitive Machines made a revenue of $41.4 million. However, the expenses related to producing its lunar landers amounted to $51.7 million. Additional operating costs of $12 million contributed to the company’s overall losses. When considering various other expenses, Intuitive Machines recorded an operating loss of $28.2 million for the quarter, which was double the loss from the same period the previous year.

The actual earnings of Intuitive Machines

With the complexity of the financial details in Intuitive Machines’ income statement, investors might find it more beneficial to assess the company’s profitability, or the absence of it, by concentrating on its. A cash flow statement is a financial document that shows the inflow and outflow of cash within a business over a specific period of time. In the first six months of 2024, Intuitive Machines spent $41.5 million in cash.

That actually exceeded the $36 million in cash depletion that Intuitive experienced in the first half of 2023 and indicates… space company It is still far from reaching a clear definition of being “profitable.”

Should Intuitive Machines stock be sold?

Indeed, as per analysts surveyed by S&P Global Market Intelligence is a financial information and analytics company. It is unlikely that Intuitive Machines will produce a favorable amount of free cash flow or adhere to generally accepted accounting principles. GAAP The company is not expected to become profitable until at least 2026. With its current revenue, the company lacks the necessary size to make a profit. Analysts believe that Intuitive’s business must grow significantly, roughly tripling its size from around $160 million in annual revenue to approximately $475 million, in order to achieve profitability.

However, that alone is not a justification to dispose of the stock; Intuitive Machines is Progressing in a positive direction.

Although the company did not make a profit in the second quarter, it saw a 130% increase in revenue compared to the previous year. The management has stated that they are expected to generate revenue ranging from $210 million to $240 million by the end of the year. triple The earnings from the previous year.

Another positive aspect is that Intuitive Machines spent $21.5 million in the second quarter to cover the expenses of sending its IM-1 lunar lander to the moon and to prepay for moon missions for its IM-2 and IM-3 landers. In essence, the company stated that most of the payments to launch providers have been made. Moving forward, the management is optimistic that they have enough remaining funds to support operations for the next year.

This indicates that the significant cash expenditure observed in the first half of the year is expected to decrease as the year progresses. Intuitive Machines will start receiving payments for upcoming moon missions, such as the $18 million it will earn for offering “rideshare” services to other entities looking to travel to the moon on its landers.

In short, Intuitive Machines may have to consider selling additional shares. generate additional funds Prior to achieving profitability in 2026, the company can increase its share price and raise more funds by generating positive publicity.

This provides investors with an additional incentive to anticipate a successful IM-2 mission later in the year.