AST SpaceMobile Inc (NASDAQ: ASTS) stock is on the rise at the start of the week after the business said it successfully deployed the largest ever commercial communications array in low Earth orbit.
The business said the communications array for its test satellite, BlueWalker 3, spans 693 square feet in size and is expected to have a field of view of over 300,000 square miles on the surface of the Earth. The array is designed to communicate directly with cellular devices via 3GPP standard frequencies at 5G speeds.
Abel Avellan, Chairman and CEO of AST SpaceMobile. Commented:
“The successful unfolding of BlueWalker 3 is a major step forward for our patented space-based cellular broadband technology and paves the way for the ongoing production of our BlueBird satellites.”
But does this latest news make ASTS stock a good investment?
What is AST SpaceMobile?
AST SpaceMobile operates a space-based cellular broadband network for mobile phones. Its SpaceMobile service provides mobile broadband services for users traveling in and out of areas without terrestrial mobile services on land, at sea or in flight.
The company is headquartered in Midland, Texas.
How Does AST SpaceMobile Make Money?
The company makes deals with existing service providers in order to expand their service coverage. For example, AST SpaceMobile said in July that it has entered into agreements and understandings with mobile network operators which collectively service over 1.8 billion cellular customers.
The company wants its SpaceMobile service to work as an optional extra for mobile phone users, with plans accommodating daily passes, monthly use, standard plans and emergency use.
ASTS Stock Financials
The company’s most recent quarterly update saw it report revenue of $7.3m for the three months ended 30 June. This is almost triple the $2.8m that the business recorded in the same period in 2021.
This growth has been outpaced by rising operational costs, which climbed from $25.1m to $35.4m across the same time period. However, net losses were still much reduced in the company’s recent second quarter because of gains on remeasurement of warrant liabilities, which amounted to $23.0m.
As of 30 June 2022, the business had cash and cash equivalents of $202.4m.
The year to date has seen ASTS stock rise in price by 7.42%, though the stock has declined in price by nearly 30% over the last 12 months due to a sharp tumble between November 2021 and January 2022.
In this time, the stock has hit highs of $14.27 and lows of $4.84.
The business has a price to sales ratio of 24.94, compared to an industry average of 1.4 in the communications services industry. Meanwhile, AST SpaceMobile has a price to book value of 5.29 compared to the industry average of 1.54. These indicate that the business could be significantly valued by these metrics.
ASTS Growth Potential
Some metrics indicate that ASTS’s shares are overpriced, but that’s because investors are courting the business due to its potential.
The company points to a global mobile wireless services market of $1.1trn and the fact that approximately half of the planet’s population have no cellular broadband access as major drivers behind its potential for growth.
However, the business still needs to undergo significant testing efforts before its offering becomes fully available to the huge potential market. The next six months are expected to see cellular broadband direct-to cell phone testing on standard handsets across six continents.
ASTS Investment Risks
There are a wealth of risks that come with investing in the potential of a business which is some distance from profitability, including share price dilution, capital issues and volatility.
However, a key risk facing ASTS is that it is being dwarfed by one of the biggest bullies in the playground, so to speak.
That hulking figure is Elon Musk’s SpaceX, which has recently partnered with T-Mobile to expand coverage for the network’s customers. The deal means that SpaceX’s Starlink satellites will provide cell-like services to these customers when they stray into areas where there is no traditional cell phone coverage.
This means that a huge business with far more satellites already in orbit is offering a very similar service to that which ASTS has developed. With its new communications array, the business has done something impressive, but that doesn’t mean it can compete with a high-profile competitor like SpaceX.
Is ASTS Stock a Good Investment?
ASTS looks like a business which could be on the verge of something very exciting. It’s launched a huge communications array into space with apparent success and has significant backing from mobile network operators who can boast a collective 1.8 billion customers.
That’s not to be sniffed at and could make the stock a great investment for the future. However, competition from Starlink and SpaceX is a genuine concern, as is the fact that the company’s shares appear to be currently trading at a premium.
Just two analysts listed by the Wall Street Journal currently cover ASTS stock, with one offering a Buy rating and the other listing the stock as Overweight. Their consensus price target for ASTS is $22.50.