Over the past few months, AST SpaceMobile(NASDAQ: ASTS) stock has surged an astounding 971%. This growth came amid agreements with major telecommunications players such as AT&T and Verizon Communications, validating its position in the space-based cellular broadband network industry and providing much-needed capital for the up-and-coming company.
AST SpaceMobile's collaboration with two leading communications providers has investors optimistic, but has the stock run too far ahead of itself? Here's the latest on AST SpaceMobile and what it means for investors.
2024 has been an excellent year for AST SpaceMobile
AST SpaceMobile is building a space-based cellular broadband network that's accessible by standard mobile phones. Connectivity from space aims to provide widely available, reliable broadband services worldwide. This can benefit areas where traditional infrastructure is cost-prohibitive or logistically challenging, and could change global communications as we know it.
The potential for 5G connectivity delivered from space is vast. According to a report by research firm MarketsandMarkets, space-based 5G technology could grow by 65%, compounded annually, through 2028.
On May 15, AST SpaceMobile made a splash when it entered into an agreement with AT&T to use its space-based network to provide broadband coverage for everyday cellphones. The agreement, which extends until 2030, upgrades the companies' partnership beyond their previous memorandum of understanding.
AST SpaceMobile Chairman and CEO Abel Avellan said: "Working together with AT&T has paved the way to unlock the potential of space-based cellular broadband directly to everyday smartphones. We are thrilled to solidify our collaboration through this landmark agreement."
Image source: Getty Images.
Good news compounded on May 29 when the company partnered with Verizon, which committed $100 million to AST SpaceMobile as part of this agreement. The commitment includes $65 million in commercial pre-payments, $45 million of which is subject to certain conditions, and $35 million of convertible notes.
AST SpaceMobile made further progress on Sept. 11, when SpaceX launched five of its BlueBird spacecraft into low Earth orbit. It completed the satellites' manufacturing, assembly, and testing and capped off a "momentous occasion" for the company, according to Avellan.
As it meets a key milestone, the company expects to redeem warrants worth $155 million related to the launch and has $440 million in cash on a pro forma basis as of June 30, 2024. The move helps to raise capital, but will dilute existing shareholders as a result.
Be mindful of AST SpaceMobile's finances
AST SpaceMobile is making some big moves, and the growth opportunity is vast. Its partnerships with AT&T and Verizon show strong demand for low-space-Earth orbit satellites for cellular service, which can help expand service in those hard-to-reach areas and validate its offering.
However, there is a significant amount of uncertainty when investing in an up-and-coming company like AST SpaceMobile. Its SpaceMobile service has yet to generate revenue. Any revenue produced in the past was from NanoAvionics, its small satellite bus manufacturer subsidiary, which it sold in 2022.
ASTS Net Income (TTM) data by YCharts.
However, with its SpaceMobile service recently getting off the ground, analysts project the company will have $6.4 million in revenue this year while posting a net loss of $260 million. Next year, analysts project that its revenue will grow to $73 million, helping reduce its net loss to $167 million.
The stock is priced at 609 times this year's earnings and 53 times next year's. Looking toward 2026, analysts project that revenue could explode to $393 million, giving the stock a valuation of 10 times those future sales.
Is AST SpaceMobile right for you?
AST SpaceMobile isn't cheap, but if things go right, it could grow into its lofty valuation. As long-term investors, understand what you are getting here -- a stock with a high upside, but which is likely to experience significant volatility along the way.
Conservative investors looking for steady growth and capital preservation may not find this appealing. If you're more aggressive and find the risk-to-reward profile attractive, it would be a stock you can add some shares of today and look to add more of over time if the stock were to fall from here.
However, there is still much execution and work to do before it scales up and produces any sort of profit, making further shareholder dilution possible. So make sure you size your investment appropriately.
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Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
