Why Intuitive Machines Is Taking Off While Broader Market Sinks

Intuitive Machines (NASDAQ: LUNR) is up 7.8% on a day when the broader market continues to move lower. The lunar exploration company has had no new launches, nor were there any developments in its financial results that would trigger such a move.

The catalyst moving LUNR stock higher is a deal that will initially be dilutive to shareholders. Intuitive Machines is buying Lanteris for $800 million. The company will pay $450 million in cash and the remaining $350 million in LUNR stock. That’s where the dilution comes in.

How long can the rally last? With 27% short interest, this could be the beginning of some short covering that could lead to a more substantial move. That’s exciting for traders, but what about the long-term investors who see Intuitive Machines as a potential 10x opportunity...in several years.

Once again, the answer is in the company’s new deal. Analysts and institutions are bullish about the company’s long-term growth and where that growth is expected to come from.

The Lanteris Deal Expands the Company’s Core Mission

As silly as it may seem to say that Intuitive Machines was “only a lunar exploration company,” that’s in fact what it was. The problem with that is that these missions take time and money to execute. That means the company’s revenue stream, while attractive, was somewhat limited in scope.

That's why the company’s deal to buy Lanteris is vital for investors who are on the fence about buying LUNR stock. Lanteris specializes in building satellites and spacecraft for servicing satellites in orbit. That’s a hand-in-glove fit with Intuitive Machines, which is partnering with NASA to build a satellite communications network between the Earth and the moon.

The addition of Lanteris broadens the company's portfolio in line with other aerospace stocks, making it more likely that Intuitive Machines will secure additional government contracts. One or more of those could involve the proposed “Golden Dome” project. This will be essential to move the company toward profitability.

Insider Buying Supports a Higher Price Target

On the same day of Intuitive Machines' earnings report, director Michael Blitzer made two separate purchases of LUNR stock.

The two purchases totaled over 240,000 shares for a purchase price of over $2.1 million.

That’s an aggressive bet that he believes the stock is undervalued. Analysts agree.

On Nov. 10, just a few days before the company’s earnings, Cantor Fitzgerald reiterated its Overweight rating on LUNR stock as well as its $16 price target. 

That’s above the consensus price target of $15.40, which would be a gain of approximately 63% from the stock’s closing price on Nov. 18.

Investors may be taking note—trading volume has remained elevated, and any positive news in the space sector could serve as a catalyst.

The Reward Outweighs the Risk

Intuitive Machines is still a young company in terms of its public trading history. For all its ups and downs, it’s trading right around its initial public offering (IPO) price, as of this writing.

The company is generating revenue but is still likely to be years away from turning a regular profit. It still fits into the category of a speculative stock.

However, the Lanteris deal changes the company’s outlook for long-term investors. First of all, it may eliminate a significant portion of the short interest in the stock, particularly since over 70% of the stock’s float is owned by institutional investors. Those institutions have been buying LUNR stock at a nearly 5:1 clip in the last 12 months.

For traders, a bullish setup may be forming. LUNR shares have been rangebound since May, and are currently trading below the 50-day simple moving average (SMA) of $10.81. The MACD is negative but stabilizing, suggesting possible bullish momentum. However, traders will want to see a break above the 50-day SMA on substantial volume.

Confirmation with higher volume and a MACD reversal would validate a breakout attempt toward recent highs. However, the strength of this move will be uncertain until technical triggers align with overall market sentiment.

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The article "Why Intuitive Machines Is Taking Off While Broader Market Sinks" first appeared on MarketBeat.