Telecommunications giant AT&T (NYSE:T) and AST SpaceMobile (NASDAQ:ASTS) teamed up to provide a space-based broadband network directly to mobile phones. This move puts AT&T and ASTS in direct competition with Starlink, a satellite internet division of Elon Musk’s privately held company SpaceX.
Following this announcement, shares of AST SpaceMobile, which is focused on offering space-based cellular broadband networks, gained 41% in after-hours trading. It’s worth noting that ASTS plans to launch its first five commercial satellites into low Earth orbit in July or August. This initial launch of satellites will enable the company to start a commercial service.
Rationale Behind the Deal
The six-year agreement between AT&T and ASTS aims to leverage space-based direct-to-mobile technology, enabling AT&T to provide extensive connectivity, especially in previously unreachable areas. This enhanced network capability is expected to increase AT&T’s subscriber base and reduce customer churn.
In the first quarter of 2024, AT&T reported consumer broadband revenues of $2.7 billion, marking a 7.7% increase year-over-year. Additionally, AT&T achieved a record-low first-quarter postpaid phone churn, saw growth in consumer broadband subscribers for the third consecutive quarter, and improved margins in both Mobility and Consumer Wireline segments.
Meanwhile, AST SpaceMobile will gain access to AT&T’s large subscriber base and benefit from the revenue-sharing model.
ASTS Reports Q1 Results
In a separate announcement, AST SpaceMobile delivered a loss of $0.16 per share, which was lower than the prior-year quarter and the Street’s forecast of a loss of $0.19 per share. Its revenue of $0.50 million fell short of the Street’s estimate of $3.17 million.
As of March 31, 2024, it had cash of $212.4 million. Moreover, the company, which has yet to generate any significant revenue, has additional liquidity of $51.5 million.
Meanwhile, the company’s total adjusted operating expenses for the first quarter of 2024 were $31.1 million, down $7.5 million sequentially due to a decrease in research and development and engineering services costs.
Is AT&T Stock a Buy or a Hold?
Analysts are upbeat about AT&T stock’s prospects. It has nine Buy and two Hold recommendations for a Strong Buy consensus rating. AT&T stock is up about 12.3% in one year. Further, analysts’ average price target on T stock is $21.05, implying a 21.47% upside potential from current levels.
Is ASTS a Good Stock to Buy?
Wall Street maintains a favorable outlook on ASTS stock, which is down about 60% year-to-date. This penny stock (learn more about penny stocks here) sports a Strong Buy consensus rating, reflecting three unanimous Buy recommendations.
Analysts’ average price target on ASTS stock is $11.13, implying a 365.69% upside potential from current levels.
