Why Intuitive Machines Stock Was Sliding This Week

Friday morning before market open, Intuitive Machines (NASDAQ: LUNR) investors were digesting a double-digit fall in the space stock over the preceding days. The monster new equity in the sector -- Space Exploration Technologies, of course -- was experiencing quite the bear run, and was dragging down other industry titles.

Intuitive Machines couldn't escape this. At that point, its share price had eroded by nearly 16% week to date, according to data compiled by S&P Global Market Intelligence.

The inescapable force

Intuitive didn't have any price-dragging news of its own this week (at least as of this writing), so its stock price slide was clearly a by-product of SpaceX's swoon. The dynamic with the latter company isn't unusual. Large initial public offerings (IPOs) -- and SpaceX's is massive -- tend to trigger high expectations.

Image source: Getty Images.

Also, the company is soaringly ambitious, and not only in its namesake field of space exploration. It also has considerable involvement in artificial intelligence (AI) and the infrastructure that supports it, and owns social media site X (formerly Twitter).

SpaceX made an impressive market debut, but subsequently, the stock obeyed gravity. Many realized that the company will need mountains of capital to develop and maintain some of its businesses -- neither rockets nor AI data centers come cheap -- and profitability might be elusive.

Meanwhile, in the run-up to the IPO, the space sector rallied. Much of this came from "a rising tide lifts all boats" philosophy, plus the idea that SpaceX's existing business partners, like Intuitive, would benefit from their peer's increased spending after those IPO proceeds landed in the company's coffers.

An intuitive play... eventually

I view the "space rout" as more of a correction -- many companies in the industry have high valuations but have yet to prove they can consistently book meaningful profits. Any overvalued stock is ripe for a sell-off.

Having said that, Intuitive has more potential than most, as evidenced by its impressive top-line growth lately. I feel that after the "SpaceX drag" runs its course, investors should consider buying Intuitive again.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuitive Machines. The Motley Fool has a disclosure policy.