ASTS Stock: How is AST SpaceMobile Up 381.59% This Year?

AST SpaceMobile is on the verge of launching its next generation of satellites for direct-to-mobile connectivity. While ASTS stock is priced high compared to its trailing revenue, its sales could be set to skyrocket.

AST SpaceMobile [ASTS] is an early-stage satellite-to-broadband company. It went public via a special purpose acquisition company (SPAC) in April 2021.

In September 2022, it launched its BlueWalker 3 prototype satellite, which was able to provide a direct satellite-to-cellphone connection from space. It is now poised to begin its commercial operations in earnest, and investors have piled into the stock in anticipation.

Ready for Launch

In August, AST SpaceMobile announced that its first five BlueBird satellites had arrived in Cape Canaveral, Florida, ahead of a launch scheduled to occur in September. AST SpaceMobile reportedly has a seven-day launch window penciled in during the month, though the precise timing has not yet been disclosed.

The BlueBird satellites are set to become the largest-ever commercial communications arrays to be deployed in low Earth orbit. It is expected they will deliver a 10-fold increase in processing capacity over AST SpaceMobile’s previous BlueWalker 3 satellite.

They will initially deliver cellular broadband connectivity to 5,600 cell phones throughout the continental US.

AST SpaceMobile’s Stock Rockets

The impending launch of AST SpaceMobile’s satellite network has had a dramatic impact on its share price. ASTS stock gained 381.59% in the year to August 30, and 620.60% over the preceding 12 months.

This is despite having fallen 24.77% from an all-time high close of $38.60 on August 19, at which point AST SpaceMobile’s shares were up 902.60% over the preceding 12 months.

Star Wars: AST SpaceMobile vs EchoStar and Viasat

The most direct competitor for AST SpaceMobile’s business is SpaceX’s Starlink, which is not currently publicly traded.

Two other established satellite internet companies are EchoStar [SATS] and Viasat [VSAT]. Both companies operate satellite fleets that aim to improve internet connectivity on Earth.

It is worth noting that AST SpaceMobile’s proposed satellite network will be distinct from these in that it will offer direct-to-mobile connectivity; in other words, cell phones and other devices will connect directly to satellites without the need for ground infrastructure such as cell towers.

Source: Yahoo Finance

This comparison returns some surprising data — especially AST SpaceMobile’s astronomical P/S ratio and its stratospheric revenue growth projection.

These two figures are in fact related, and are due to the very early stage that AST SpaceMobile is at commercially. It did not generate any revenue at all in 2023, and has only generated $1.4m during the first two quarters of 2024, although this is expected to jump to $94.02m by the end of the year. Even so, its P/S ratio is based on an almost negligible amount of revenue over the last 12 months — hence its four-figure size.

In 2025, however, its revenue is expected to increase to $498.56m — more than five times its expected 2024 total and more than 350 times its 2023 total. Viasat’s revenue is only expected to grow 3.80% in its equivalent financial year, while EchoStar’s revenue is projected to fall.

So, while AST SpaceMobile is very expensive compared to its competitors, this pricing represents far greater market expectations of sales growth in the medium term.

AST SpaceMobile Stock: The Investment Case

The Bull Case for ASTS Stock

The direct-to-cellular and non-terrestrial network market is expected to see rapid growth. A July report from ABI Research tips the market to be worth $17bn by 2032, registering a CAGR of 39.8%.

This growth potential has industry insiders excited. Analysts at investment firm B. Riley increased its price target from $26 to $36 following the announcement, on August 28, that the company would redeem any outstanding de-SPAC warrants on September 27.

“We continue to believe AST has various additional sources of capital available to fund the deployment of its SpaceMobile constellation,” said the firm. “Possible examples include sovereign funding from the US Ex–Im Bank and/or others as well as a repeatable pre-payment template for government and MNO customers wishing to secure access to the network, not to mention potential investment from the US.”

Space is a fiercely competitive and capital-intensive industry, but these sources of capital — in addition to the $155m funding it raised in January from Vodafone [VOD], AT&T [T] and Google [GOOGL] — could confer a significant advantage over competitors.

The Bear Case for ASTS Stock 

The market is pricing in a steep jump in revenue over the next two years, and this is not guaranteed to occur. This is always true of analyst forecasts, but it is particularly relevant to AST SpaceMobile. Its September launch will need to go as planned in order to meet these revenue targets, and space launches are far from guaranteed to succeed. Even experienced space launch companies can see failure rates of 5%; SpaceX, the likely launch provider, had a launch failure rate of approximately 4% in 2022.

Speaking of SpaceX, its direct-to-cellular network, Starlink, constitutes a major established player in the industry, and one with which AST SpaceMobile may have to compete for market share over the long term.

Even if AST SpaceMobile achieves its forecast revenue growth, it is not expected to turn a profit until 2027, according to FactSet analysts.

Conclusion

This report has assessed AST SpaceMobile’s stock in the context of its upcoming BlueBirdsatellite launch. The stock is not yet revenue-generating, so there is an inherently high level of risk to its prospects. While a successful launch could see its revenue grow quickly, its valuation is high considering the uncertainty, and investors should conduct thorough independent research before making any investment decision.

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