With its shares up over 450% year to date, AST SpaceMobile (NASDAQ: ASTS) has caught the attention of growth-hungry investors looking for the next big thing. The Texas-based satellite maker is rapidly moving toward launching its first satellites into low Earth orbit, and full commercial operations could soon follow.
Let's explore what the next 12 months could have in store for the company and its shareholders.
What is AST SpaceMobile?
Founded in 2017, AST SpaceMobile is a potentially disruptive telecommunications company aiming to build a space-based cellular broadband network to bring connectivity to areas with coverage gaps. It went public by merging with a special purpose acquisition company ( SPAC ) in April 2021, priced at around $10 per share.
Image source: Getty Images.
Like most SPAC companies, SpaceMobile's stock slowly drifted downward over the last three years as rising rates shifted investor attention away from speculative growth stocks. However, in mid-2024, shares began to soar as it moved closer to commercial operations.
SpaceMobile has completed final assembly and environmental testing at its Texas manufacturing facility and secured FCC approval to launch five of its commercial BlueBird satellites into low Earth orbit in the first half of September. The BlueBird is designed to connect to terrestrial smartphones and expand 4G/5G cellular coverage in hard-to-reach areas.
Unlike other space-related SPAC companies like Virgin Galactic , which lost a test pilot in 2014, SpaceMobile's launches involve sending hardware (not humans) into space, so much less is at stake if things don't go according to plan.
A very premature business
Part of the reason SPAC-related companies have tended to underperform is their relative lack of maturity compared to businesses that hit the market through traditional initial public offerings ( IPOs ). SpaceMobile's second-quarter earnings highlight this challenge.
The company's revenue of just $900,000 pales in comparison to its total operating expenses of $63.9 million, which includes hefty outflows for engineering services and research as it develops its satellite platform.
With cash and equivalents of around $285 million on its balance sheet, SpaceMobile can sustain several more quarters of the current cash burn. And this will probably be enough to bring the company over the hump to commercial operation.
That said, having a commercial operation doesn't necessarily mean profitability any time soon. And investors shouldn't be surprised if SpaceMobile's losses increase over the next 12 months as it grapples with the challenges needed to grow its business.
SpaceMobile will almost certainly rely on outside sources of capital, such as debt or equity dilution , to stay operational . And while this will buy more time for the business to scale up, it can erode current investors' claim on future earnings and potentially hurt the stock price.
Is AST SpaceMobile stock a buy?
According to analysts at Morgan Stanley , the space industry could be worth $1 trillion by 2040, with satellite-based broadband representing around half of the opportunity. Right now, industry leaders like SpaceX and Blue Origin are privately held, making it difficult for regular investors to access this long-term opportunity.
SpaceMobile helps change this paradigm. And despite having a market capitalization of just $9 billion compared to SpaceX's estimated $210 billion, partnerships with blue chip telecoms are a vote of confidence in its technology and strategy.
In May, Space Mobile inked an agreement with AT&T to provide wireless service from space through 2030. The company also has a similar deal with Verizon Communications, which hopes to use Space Mobile's technology to target 100% coverage of the continental U.S. for space-to-cellphone service.
Locked in with the mainstream carriers, SpaceMobile can hit the ground running as soon as commercial operations start. And the company looks poised for success over the next year and beyond.
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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy .
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