AST SpaceMobile (ASTS) is making strides in developing a space-based cellular broadband network. Despite being pre-revenue and facing market fluctuations, its successful satellite launches and significant partnerships with telecom giants like AT&T (T), Verizon (VZ), and Vodafone (VOD) highlight its potential for future growth. The company aims to achieve extensive U.S. coverage by 2025 and expand globally, targeting revenues of up to $10B by 2029, primarily from under-served populations, travelers, and government contracts.
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It recently received Special Temporary Authority from the FCC to conduct U.S. testing on its first five commercial BlueBird satellites, which aim to provide seamless cellular broadband services by directly connecting to unmodified smartphones. The stock is up over 675% in the past year, and it remains a high-risk, high-potential-reward situation for the heartiest of investors.
Raising Capital to Hit Scale
AST SpaceMobile specializes in developing and providing a space-based cellular broadband network for smartphones across the United States. The company’s SpaceMobile service caters to users outside of terrestrial cell coverage areas. The company has sparked investor interest with its Bluebird satellites and notable partnerships with leading telecom firms like AT&T and Verizon. Its core value proposition is its unique global cellular broadband network offering that can directly connect to unmodified smartphones.
The company has entered a binding agreement with Ligado Networks, acquiring long-term access to up to 45 MHz of lower mid-band spectrum in the United States, which is expected to enhance its space-based cellular broadband capabilities. Additionally, Vodafone has made the world’s first video call via satellite using a standard smartphone in a remote location, which was made possible through AST SpaceMobile’s BlueBird satellites.
However, to hit scale, AST SpaceMobile urgently needs finances as it works to deliver on its operational BlueBird comsats and other communications services. To tap into the $1 trillion global mobile wireless services market and provide a worldwide DTC service, AST estimates it will need around $3 billion in total. While pre-payments for satellite service from partners like AT&T, Verizon, and Vodafone will contribute to these needs, the company will also rely heavily on stock sales and debt issuances.
The company recently announced plans for a private offering of $400 million of convertible senior notes due 2032. Further, AST will allow underwriters to buy an additional $60 million, which, after transaction fees, leaves AST with nearly $1 billion in cash. The funds are earmarked for AST’s ongoing build-out of direct-to-cell satellite communications (DTC) satellites.
Satellites Aren’t Cheap
For the third quarter of 2024, the company reported total operating expenses of $66.6 million, an increase of $2.7 million compared to the second quarter. This increase was primarily due to a rise in research and development costs by $10.3 million and engineering services costs by $0.6 million. However, these increases were partially offset by a $2.3 million reduction in general and administrative costs and a $5.9 million decrease in depreciation and amortization expense.
At the quarter’s end, the company held total cash, cash equivalents, and a restricted cash position of $518.9 million. The cumulative gross capitalized property and equipment costs amounted to approximately $374.0 million, with accumulated depreciation and amortization at $113.9 million. These capitalized costs encompass expenses related to satellite materials for BlueBird satellites, advance launch payments, Block 1 and BlueWalker 3 satellites, assembly and integration facilities, assembly and test equipment, and ground antennas.
Analysts Are Cautiously Optimistic
The stock has been volatile over the past year, going from $1.97 on the low end to $39.08 at its recent peak. It currently trades near the middle of its 52-week range. It shows mixed technical signals, with negative price momentum over the 20-to-100-day moving averages but positive momentum for the 10-day and 200-day moving averages.
Analysts following the company have been constructive on ASTS stock. For instance, Scotiabank analyst Andres Coello, a five-star analyst according to Tipranks’ ratings, recently reiterated an Outperform rating on the shares, though lowered the price target to $40.20 (from $44.70), noting a lack of clarity from the impact of higher interest payments on the new senior notes and from the impacted cash flow the company will pay Ligado.
AST SpaceMobile is rated a Moderate Buy overall, based on the recent recommendations of two analysts. The average price target for ASTS stock is $35.60, representing a potential upside of 65.81% from current levels.
Final Analysis on ASTS Stock
Despite its pre-revenue status and volatile market presence, AST SpaceMobile is making headway in creating a space-based cellular broadband network. Anchored by successful satellite launches and key partnerships, the company is in the early stages of providing an innovative solution for users outside terrestrial cell coverage areas. As it progresses toward large-scale expansion, it’s clear that the firm may need to raise more capital, potentially diluting shareholders. Nonetheless, it is an exciting venture requiring resilience and patience from investors willing to bear the risk.
