Is AST SpaceMobile Stock a Buy?

It's been a banner year for AST SpaceMobile (NASDAQ: ASTS) . The satellite designer and manufacturer has made huge deals with major telecom providers during the year, and the stock has surged by 1,153% since slumping to its 52-week low in April.

The company recently launched five of its satellites, validating its position in the space-based cellular broadband network industry. With the stock now down by 35% from the all-time high it reached in August, is now a good time to buy?

AST SpaceMobile is making substantial progress

Over the past several years, private companies have taken over space exploration and infrastructure development.

Founded in 2017, AST SpaceMobile designs and manufactures satellites that enable space-based cellular broadband accessible by standard mobile phones. Its satellites can provide reliable broadband services worldwide. This technology is especially useful in regions where building traditional telecom infrastructure is cost-prohibitive or logistically challenging.

On May 15, the company entered into an agreement with AT&T that will allow the telecom giant to use its space-based network to provide broadband coverage to everyday cellphones. The companies have partnered since 2018 through a memorandum of understanding. The new commercial agreement, which extends their partnership until 2030, shows AT&T's commitment to satellite solutions to improve connectivity.

Two weeks after that announcement, AST SpaceMobile announced a partnership with Verizon Communications . That telecom company committed $100 million to AST SpaceMobile -- $65 million in commercial pre-payments ($45 million of which is subject to certain conditions), and $35 million in convertible notes.

In addition, AST SpaceMobile has secured strategic investments from Alphabet 's Google and Vodafone . Earlier this year, it received a contract from a prime contractor working with the U.S. government to perform certain tasks on its space-based network.

First satellites deployed

On Sept. 12, SpaceX's Falcon 9 rocket launched the first five AST SpaceMobile satellites, known as BlueBirds, into low Earth orbit. The BlueBird satellites have a communication antenna that spans 693 square feet when fully extended, the largest ever deployed by a commercial spacecraft. Abel Avellan, founder, chairman, and CEO of AST SpaceMobile, called the launch a "momentous occasion."

Image source: Getty Images.

BlueBird satellites will deliver cellular connections at broadband speeds for voice, data, and video service across the U.S. and in select markets. According to AT&T Chief Operating Officer Jeff McElfresh, "This moment has been several years in the making, and I am proud of our teams' work, in collaboration with AST SpaceMobile, to help make space-based connectivity a reality."

With the launch of the first batch of BlueBird satellites, AST SpaceMobile met a key milestone and was able to redeem warrants worth around $153.6 million. That helped it raise capital, but by issuing new shares to warrant holders, it will dilute existing shareholders .

Is it a buy?

AST SpaceMobile has made substantial progress over the past six months, and investors and analysts have noticed. Deutsche Bank analyst Bryan Kraft recently raised the firm's price target from $22 per share to $63 per share. The bank also updated its valuation methodology on AST SpaceMobile, saying its previous model "undervalued the company's growth opportunity," according to The Fly website.

The company's space mobile business has yet to produce significant results. Next year, analysts project its revenue will grow to $73 million, helping bring its net loss down to a projected $167 million. Looking ahead to 2026, analysts' project revenue could swell to $393 million. Based on that figure, the stock currently has a valuation of 10 times those future sales.

The high valuation reflects investor optimism about the future of space-based mobile communications systems. According to a report published by MarketsandMarkets, the "5G from space" market is projected to grow at a compound annual rate of 65% through 2028.

AST SpaceMobile stock has high upside potential as that niche of the telecom market grows. However, as is common for growing young companies burning cash in emerging industries, the stock will likely experience a lot of volatility . Given that, as an investment, it would be best suited for patient investors with a high tolerance for risk.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Courtney Carlsen has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool recommends Verizon Communications and Vodafone Group Public. The Motley Fool has a disclosure policy .