We won’t run out of money for at least a year

Investors in shares of startup Moon Lander Intuitive machines (NASDAQ: LUNR) had a rather curious experience last week. In announcing its results earlier this week, Intuitive announced the shocking news that instead of losing $0.18 per share (as Wall Street had expected), it earned $0.18 per share (as expected). profit of $0.29 per share. One might have expected that kind of news to draw a round of applause from Wall Street.

This is not the case.

Or at least, not right away. In fact, Intuitive Machines shares fell about 1.4% on Tuesday after the earnings release, and then fell 2.2% on Wednesday. It wasn’t until Thursday that investors seemed to notice Intuitive Machines’ good news and started buying the stock, sending Intuitive Machines’ shares up more than 13% and erasing all of the losses from earlier in the week.

But could it be that investors’ first instinct, to “sell the news,” was the right reaction?

Intuitive Machines Reports Second Quarter Results

After all, while Intuitive’s “earnings” looked surprisingly good at first glance, they didn’t really hold up to scrutiny. Analyzing the report Thursday, Barron’s The magazine observed that in reality, the company’s surprise profit “comes down to accounting for items like warrants” and capital gains liabilities – one-time items unrelated to the company’s core business and not indicative of its operational strength.

On the contrary, as Barron’s noted: “Intuitive’s operating loss for the quarter was $28.2 million, higher than the $9 million loss that analysts had expected.” (it is ours who emphasize).

Indeed, Intuitive Machines generated $41.4 million in revenue in the second quarter, but the cost of that revenue (i.e., the cost of building its lunar landers) came in at $51.7 million. Operating costs added another $12 million to the company’s losses, and when factoring in other expenses, Intuitive ended up with an operating loss of $28.2 million for the quarter, twice as wide as its loss a year ago.

What Intuitive Machines Really Won

Given all the accounting intricacies of Intuitive Machines’ income statement, investors might be better off calculating the company’s profitability – or lack thereof – by focusing on its cash flow statement. It says that during the first half of 2024, Intuitive Machines burned through $41.5 million in cash.

That was actually a bit worse than the $36 million cash burn Intuitive suffered in the first half of 2023 and suggests that space company is still quite far from a real definition of what “profitability” is.

Is Intuitive Machines stock a sell?

In fact, according to analysts interviewed by S&P Global Markets InsightsIntuitive Machines likely won’t generate positive free cash flow or become profitable under generally accepted accounting principles (GAAP) until 2026 at the earliest. At its current revenue level, the company simply doesn’t have the scale to turn a profit. To achieve that goal, most analysts agree that Intuitive’s business needs to triple in size, from the roughly $160 million in annual revenue it currently generates to something like $475 million…