The stock of AST SpaceMobile rises 1,300% in just six months, and analysts project a 57% increase in value during the following year.
TakeAway Points:
- In spite of 20% of its float being sold short, AST SpaceMobile’s shares rose 1,300% in just six months thanks to partnerships with AT&T and Verizon.
- In order to deliver broadband cellular access from space, the business intends to use SpaceX to launch five commercial satellites.
- Although the company’s lofty revenue targets have some analysts sceptical, they remain bullish with buy ratings and a predicted 57% increase in share price.
AST SpaceMobile’s Stock Surge
AST SpaceMobile Inc., a small telecom company aiming to compete with SpaceX, has seen its stock price skyrocket from $2 to $28 in just six months. This 1,300% increase has made it the best performer in the small-capitalization Russell 2000 Index over the past half-year. Despite this impressive rally, more than 20% of its float remains sold short, indicating ongoing skepticism about the stock’s prospects. This skepticism can lead to significant positive reactions for shares when the company performs well.
AST went public in April 2021 through a merger with New Providence Acquisition Corp., closing its first trading day at nearly $12. However, the stock experienced a prolonged decline, briefly falling below $2 in early April this year. The turnaround began in May when AST reached an agreement with AT&T Inc. to provide wireless service from space, putting it in direct competition with SpaceX’s similar deal with T-Mobile US Inc. Two weeks later, Verizon Communications Inc. announced a $100 million investment in a partnership with AST, further boosting the stock price.
By August 19, AST’s shares hit a high of $38.60, marking an 1,800% increase since April. Although the stock has since pared some of those gains, it remains substantially up, closing at $27.90 on Wednesday.
“Some of the recent rally was merely a recognition of work that the company has been doing for years; the stock should have never fallen to $2,” said Scotiabank analyst Andres Coello.
Launch of commercial satellites
AST is set to launch its first five commercial satellites into low-earth orbit from Cape Canaveral, Florida, aboard a SpaceX rocket. These satellites, roughly the size of a one-bedroom apartment, are part of AST’s plan to provide broadband cellular connectivity through low-orbiting satellites rather than traditional cell towers. The company aims to eventually have dozens of satellites orbiting more than 300 miles above Earth.
“We have paired a solid business strategy with innovative technology that we believe will drive this mission forward successfully,” AST said in a statement to Bloomberg News. Kevin Mak, director of the Real-Time Analysis and Investment Lab at the Stanford Graduate School of Business, likened AST’s technology to “flying cars,” emphasizing its broad scope, scalability, and crucial importance.
However, not everyone is convinced. Sahm Adrangi, founder of Kerrisdale Capital Management, which is short AST, said, “The valuation here incorporates an amazingly rosy scenario that I don’t think will materialize and I think investors are going to be disappointed.” Despite this skepticism, betting against AST has been costly, with short sellers accumulating paper losses of more than $600 million in the last six months, according to S3 Partners LLC.
Financial Implications and Analyst Opinions
AST has five Wall Street analysts covering the stock, all with buy ratings and price targets indicating a 57% rise in the share price over the coming year. Deutsche Bank analyst Bryan Kraft recently raised his target for AST to a Street-high $63 from $22, citing the company’s improving risk profile.
AST’s management has set ambitious goals, projecting more than $16 billion in revenue by 2030. However, through the first half of this year, the company generated only $1.4 million in sales and is on pace to fall short of its initial estimates for more than $1 billion in annual revenues by the end of 2024. Despite these challenges, AST’s stock performance stands out as a relative success story compared to other space-related de-SPACs like Planet Labs PBC and Terran Orbital Corp., whose stocks have significantly declined.
