Again, so soon, LUNR? I just wrote about you. And I wrote about you. And, and, and… Last month (August 2024), I wrote about Investing And Roller Coaster Emotions – LUNR because the company had news and the stock responded. I thanked my intuition, at least a little, because I followed it and bought more shares. (Intuitive Machine Intuition) And, now, they did it again, in a much grander fashion. 

“OK, intuition, why are you encouraging me to write about this stock, LUNR, on this day, August 23, 2024?“

I bought shares of LUNR on the 23rd oof August. The next week, LUNR announced a $116.9M contract. The stock spiked. This week, LUNR announced a $4.82B contract – potentially. Yeah. It spiked again. Up over 60% in five days. Up over 118% in one month. Evidently, my intuition deserves greater thanks that I’ve already delivered. 

I give myself permission to copy from myself.

“The market value of a company can be based on its future revenues discounted by risk. A $116.9M check is worth $116.9M, but work must be done, which is a risk; rockets and such must be launched, orbited, and landed, which are risks; competition happens; disasters at the Earth facilities can happen; budget cuts happen; etc.; etc.; etc. If that check is going to arrive later, then inflation diminishes it. That reduces its present value. The check may be for $116.9M, but its value to the company and its influence on the stock is different. The analysts guess. The investors decide. Reality eventually reveals the truth.” –Investing And Roller Coaster Emotions – LUNR

This new contract is worth $4.82B (B not M), “but work must be done…”. And ‘worth’ is a possible worth, not a guarantee, but also not a limit when indirect effects are included. For the purposes of this post, I’ll point at the lack of certainty, but won’t* asterisk* every* word*.

Pardon me as I thank my intuition, again. Tea helps.

First, and in no particular order: This emotional roller coaster was less of a ride than the previous one, even though it is worth more than 40 times as much. B is bigger than M, a lot bigger. My emotions weren’t 40 times greater. Experience helps. News hits. Emotions run. Investors buy or sell. Then, slower thoughts arrive. Future revenues are great, but this the present. Enthusiasm might fade, and so can the price. Been here. Ridden stocks up. Optimism persists, but this is not the time to cash out.

Second: But, but, but… 4.82B! Yes, over several years. Yes, there are all of those risks. And, I wonder if there is an element of disbelief. LUNR? Really? That tiny company? Once upon a time, SpaceX was small. The comparison isn’t a duplication, but they’re more similar than many companies. But, $4.2B, which can be the beginning; or, more possibly more correctly, that $116.9M was the beginning, or any of their previous contracts. Overnight successes in the space industry take more than overnight. How big can they become? 

Third: Why isn’t a forty-fold increase in the value of a contract creating a forty-fold increase in the stock price? People are people. The future isn’t now, even though it isn’t much further. Multiplying a tiny market cap by 2 or 3 may still be within the statistical variation of the analysts’s estimates in such a new industry as commercial lunar space. Multiplying by 40, however, is a harder sell to an investment manager. What really is the present value of the future revenues discounted for risk? Until those estimates narrow, there may be great variation in what is considered an appropriate price.

Wildly different contract sizes, basically the same stock price movement – so far.

The news may still be sinking in. I’d be surprised if anyone’s estimating model for lunar businesses has matured. Every launch and mission will refine those models. This ride can take a while. 

SpaceX is royalty, but the US government may not want to be limited to that one voice. Boeing’s credibility is damaged (and many of my friends who worked there have their theories). China and other commercial interests aren’t waiting. This is a race that doesn’t wait for media outlets to make that declaration. Businesses do that for themselves, or get left behind. 

LUNR closed at $9.28, September 19, 2024. Their market cap is $1.24B. There’s that B. Nice to see it. How big can it be? This looks like a stock to watch because of its potential, but also because of its unknowns. This won’t be dull. Thank you, intuition. Got any other good ideas?