Long-term investors shouldn't make decisions about buying or selling a stock based on a single event. Data from a quarterly earnings report, for example, should be monitored, reviewed, and added to an investor's mental database. But a quarterly report is just a single snapshot of the company's business.
Yet in the case of AST SpaceMobile (NASDAQ: ASTS) , there is one upcoming event to which investors looking for a growth opportunity should be paying especially close attention. The company is getting ready to launch its first set of commercial broadband satellites. Those five satellites represent the commercial start to what could become one of the largest global telecom companies over the coming years.
Untapped potential for space-based mobile connectivity
AST's patented technology will supply cellular providers around the world with broadband internet access to connect those without internet service. The market for that could be huge . AST estimates that worldwide, as of the end of 2022, there were 5.5 billion cellular subscribers, and as many as 3.5 billion of them were not subscribed to cellular broadband. The opportunity this offers helps explain why the stock has exploded by about 600% over the last 12 months.
Importantly, AST SpaceMobile is building the first and only global, space-based cellular broadband network to operate directly with mobile devices. It aims to connect standard mobile phones directly to satellites, bypassing the need for ground infrastructure like cell towers. The satellite network could improve connectivity to the billions of existing mobile subscribers in addition to offering service to those who are currently unconnected.
AST SpaceMobile's service also differentiates itself from SpaceX's Starlink because it would connect directly to typical smartphones without any additional hardware. Existing mobile devices will be all that users need. Starlink requires users to have a satellite dish for connectivity. That dish must be purchased, then set up and pointed toward the satellites to access the internet.
Sept. 11 launch window
Somewhat ironically, while SpaceX's Starlink service will compete with AST, a SpaceX Falcon 9 rocket is currently scheduled to launch AST's first five BlueBird satellites during a launch window that begins Sept. 11.
That launch also highlights the complex relationships among companies and regulatory bodies in the evolving space sector. In May, AST announced a new commercial agreement with AT&T to provide its space-based broadband network directly to existing cellphones. AT&T Chief Operating Officer Jeff McElfresh explained the relationship this way:
Space-based direct-to-mobile technology is designed to provide customers connectivity by complementing and integrating with our existing mobile network. This agreement is the next step in our industry leadership to use emerging satellite technologies to provide services to consumers and in locations where connectivity was not previously feasible.
Mobile network operators like AT&T and Verizon Communications will be both competitors to and partners with AST SpaceMobile. Those network operators spend more than $300 billion in capital expenditures and nearly $70 billion for cell tower leases annually, according to a report by Scotiabank. That consumes an enormous amount of free cash flow, giving those companies a good reason to partner with AST for its planned global satellite constellation.
Early for valuation estimates
As is the case with other companies that are attempting to commercialize emerging technologies, it is difficult to properly value AST SpaceMobile at this early stage. Its market cap recently stood at about $7.5 billion. The network operator spending noted above dwarfs that value.
The opportunity to enhance mobile network operators' coverage for typical smartphone users and for potential government contracts is vast. But there are plenty of hurdles to overcome. That includes getting through the initial BlueBird launch successfully.
Any issue with this launch might negatively impact AST's share price in the short term. Regulatory issues will also need to be navigated, as governments need to ensure that different satellite operators' networks can coexist without causing harmful interference to each other.
But AST SpaceMobile has enormous potential. Even with SpaceX's Starlink well ahead in terms of the number of satellites it has in orbit, there are separate markets to be tapped by AST. Starlink largely targets broadband internet users in remote or rural areas. AST will focus on mobile connectivity for the billions of current and potential cellphone users.
That makes the stock a worthwhile speculative investment for aggressive investors. Given that its thesis has so many moving parts, the stock is a good candidate for a cautious buying strategy; I'd suggest those who want to should ease into their full position by buying in thirds . The most notable of those variables is the upcoming scheduled launch. For those interested in this space sector growth stock, that BlueBird launch will be well worth monitoring.
Howard Smith has positions in AT&T. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy .
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