Should Investing in AST SpaceMobile's Shares be Considered at the Moment?
In the current astronomical landscape, a new space race is gaining momentum, and it's not the world powers leading the charge but private industries. Names like Elon Musk and Jeff Bezos have been making waves with their groundbreaking innovations in rocketry, while a multitude of smaller start-ups compete for dominance in various space-related markets.
AST SpaceMobile (ASTS -5.66%) is one of these start-ups betting on providing mobile communications through a satellite fleet as its main offering. Investors have shown confidence in this concept, contributing to a remarkable 400% increase in AST's stock value this year alone. But with such enthusiasm growing, is now the time to invest in AST?
Can you hear that distant signal?
Most of us in the United States are accustomed to the sight of cell towers across the landscape, ensuring a high degree of reliability in cell service and broadband access.
However, this is far from the reality for many parts of the world, where more than a third of the global population remains disconnected from the internet, and even those with access often encounter severe connectivity issues. Cell service is far more prevalent, but it still fails to meet the needs of countless individuals.
AST designs and manufactures satellites capable of providing cellular broadband coverage anywhere in the world, without requiring any specific equipment or modifications to the cellphone itself.
The latest figures were lackluster, but it's still early days
During the company's third-quarter financial report, investors expressed disappointment with the performance. As a result, the stock price saw a sharp decline of nearly 20%.
Since then, shares have steadily climbed back, now only showing a 2.7% drop since prior to the earnings call. The significant dip in stock value was primarily due to an earnings miss – reporting a $1.10 loss per share, compared to the anticipated $0.23 loss.
Although this misstep is a considerable blow, keep in mind that AST is still in the early stages of its development. Traditional financial markers that work well for more established businesses may not be as useful for AST, at least not at this point in time. With barely any revenues generated – just $1.1 million last quarter – the primary focus should be on the company's growth and progress.
This quarter marks the launch of the first five satellites, marking a significant milestone in AST's journey. It plans to start testing its network in beta, having already secured partnerships with major telecom companies like AT&T, Verizon Communications, and others. AST has also secured contracts with launch providers, such as Blue Origin, granting it permission to send another 60 satellites into orbit.
A surge in revenue is on the horizon, but profitability may take longer
With its first five satellites currently in space and more on the way, AST can unlock the services it was created to offer. Revenue should naturally follow suit.
However, the journey towards network full capacity is a costly one, requiring the company to invest a staggering $1 billion to put the subsequent 60 satellites into orbit. To achieve this, AST will need to seek additional funding, whether by selling stocks or taking on debt.
The success of AST is hinged on its ability to optimize the launch and deployment of its network as swiftly and cost-effectively as possible. Can it secure enough funding without incurring excessive expenses in the process? I believe so, but be alert to potential stock dilution in the near future.
AST presents an intriguing opportunity
AST's vision for the future of broadband access is compelling, making its value proposition evident. With established partnerships in place, the company is well-positioned to profit from this vision.
For those with a high risk tolerance and a long-term vision, I would recommend investing in AST SpaceMobile. However, if your focus is on safeguarding your capital, particularly if approaching retirement, I would suggest exploring alternative investment options.
Given AST's ambitious plans to provide global mobile communications through its satellite fleet, potential investors might want to consider the financial implications. If you're looking to diversify your portfolio and have a high risk tolerance, investing in AST could offer promising returns as its revenue potentially surges with the successful deployment of more satellites. However, it's important to note that the path to profitability may take longer due to the significant costs involved in launching and expanding the network.
