AST SpaceMobile: A Look into the Future

The stock of AST SpaceMobile, which specializes in manufacturing satellites for mobile communication in low Earth orbit (LEO), has experienced a remarkable rollercoaster ride since its IPO in April 2021. After an initial price of $11.63, the stock plummeted to about $2 in April this year following the postponement of its first commercial satellite launch. Today, the stock is trading at around $25, primarily due to the successful launch of the first five Block-1 BlueBird satellites on September 12. However, the question remains whether this upward trend can continue. AST SpaceMobile's LEO satellites provide mobile connectivity for 2G, 4G, and 5G devices in hard-to-reach "dead zones" that terrestrial networks cannot cover. While Starlink, a major competitor, initially focused on high-frequency spectra, AST emphasizes low-frequency spectra, which offer larger coverage areas but are slower. Interestingly, AT&T and Verizon, both providers of low-frequency 5G connections, recently entered into partnerships with AST SpaceMobile to keep pace with the cooperation between T-Mobile and Starlink launched last year. This support could position AST SpaceMobile as a potential challenger to Starlink, which already offers satellite-based mobile services in over 80 countries. Despite these promising prospects, AST SpaceMobile's financial situation is currently strained. The company generated revenues in 2021 and 2022, mainly through its former subsidiary NanoAvionika but had no earnings in 2023, posting a net loss of $87.6 million. In the first half of 2024, AST generated only $1.4 million in revenue, a stark contrast to a net loss of $92.3 million. Analysts forecast total revenue of just $6.4 million for 2024 with a net loss of $259.7 million. This is a significant deficit given that AST SpaceMobile has over $285.1 million in liquid assets but liabilities amounting to $337.8 million and a high debt ratio of 1.4. The plans for the coming years are nonetheless ambitious: the first Block-2 BlueBird satellites, which are about 3.5 times larger and have approximately 10 times the data processing capacity compared to Block-1 technologies, are slated to launch in the first quarter of 2025. A total of 17 of these satellites are expected to be deployed, but final approval from the Federal Communications Commission (FCC) is still pending. Future growth for AST SpaceMobile will heavily depend on securing further prepayments from mobile partners and additional funding from government-supported export credit agencies, rather than more stock sales that could dilute shares. Optimistic analysts expect AST SpaceMobile to reach annual revenue of $393 million by 2026 and reduce the net loss to $30 million. However, the company is already valued at ten times its estimated 2026 revenue, indicating that much of the growth potential is already priced into the stock. Despite the challenges, AST SpaceMobile may still have considerable room for growth, especially compared to Starlink, which, according to Quilty Space, could generate around $6.6 billion in revenue this year. However, delays and funding issues could also cause the stock to fall back into single-digit territory instead of delivering further multibagger returns. Cautious optimism is thus warranted.