Why AST SpaceMobile Stock Popped, Then Dropped on Friday

Shares of satellite telecommunications company AST SpaceMobile (NASDAQ: ASTS) rose 15% through 10 a.m. ET Friday morning after yet another Wall Street analyst hiked its price target . By 11 a.m., though, the stock had turned tail and plunged 8.5%.

Why the pop and why the drop? TheFly.com notes Scotiabank analyst Andres Coello raised his target on AST to $28 today. That sounds like good news, and Coello insists the stock will outperform. Problem is, AST stock already costs $35 per share, so this is also sort of bad news.

AST has got space momentum

On Wednesday, AST confirmed plans to launch five Bluebird communications satellites in the first half of September.

There are caveats. Five satellites aren't a lot. AST needs 20 to cover the whole U.S., and 168 satellites to cover the world. These first five will only enable beta tests of 5,600 calls at a time. And while phone calls can be nationwide, coverage is not continuous -- i.e., there will be dead zones.

To expand these capabilities, AST is building 17 more satellites for later launch.

Is AST stock a buy?

To pay for this, AST is raising cash, and now has $287.6 million on hand, up $75 million from last report. What worries me, though, is the rate at which it is burning cash.

In its most recent 10Q filing, the company reported $64.3 million in negative operating cash flow year to date, and $61.8 million in capital spending -- so negative free cash flow of $126.1 million. But Wednesday's update said that "we have incurred approximately $347.5 million of gross capitalized property and equipment costs" in the first half of the year -- which seems to imply a much faster rate of cash burn.

Meanwhile, building out the whole fleet of 168 comsats is still expected to cost the company $5 billion in cash that it doesn't currently possess . Until we get a better handle on how AST will pay for all these, it's hard to call its stock a buy.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .