Is AST SpaceMobile a million dollar stock?

Latest exciting news from AST SpaceMobile (ASTS -1.05%) is that it delivered five satellites to Cape Canaveral. This is the first step towards actually delivering the space cellular broadband network it is building. If he can get that system up and running, AST SpaceMobile could be a million dollar stock. But don’t get too excited; this is just a small step on the way to a full-fledged service offering.

AST SpaceMobile does not have a service for sale

The problem with the AST SpaceMobile today is that it really only has one functional satellite in orbit. The satellite was installed in late 2022 and was used to demonstrate that the company’s goal of creating a broadband cellular network in space that would work with existing cellphones was possible. At this point, that’s all the AST SpaceMobile has to offer the world — a successful proof of concept.

Image source: Getty Images.

This proof of concept, however, was enough to get the telecom giants on board AT&T (NYSE: T) and Verizon (NYSE: VZ) on board as investors. There are two benefits here. First, AST SpaceMobile has access to some deep pockets as it appears to be raking in the cash. Second, AST SpaceMobile will have built-in customers when it finally starts putting additional satellites into space so it can operate a commercial service. Creating such partnerships has been a key objective for management, and these two agreements, among other partnerships, represent an important foundation for the future.

That future, meanwhile, is starting to look more and more interesting. AST SpaceMobile has completed construction of five commercial satellites and has now delivered them to Cape Canaveral. While there are no guarantees, the hope is that they will be released in September. However, it is highly unlikely that the company will be up and running instantly, as the satellites will need to be deployed and tested before they can actually start serving customers. But AST SpaceMobile is on the verge of a real deal.

There is still a long way to go for AST SpaceMobile

The remarkable progress made in recent months is why the stock has risen. In just three months, the stock increased by over 700%! This is a huge gain in a very short period of time and the price is a lot of good news. Of course, if AST SpaceMobile can get its space-based cellular broadband network up and running, there could be even more big wins ahead. It could, indeed, help turn more aggressive investors into millionaires.

The key here, however, is that an investment here is best suited for aggressive investors. The company is very clear, stating in the risk section of the 10-K that “We will continue to experience operating and net losses each quarter, at least until such time as we begin to generate revenue from our planned commercial satellite launches and can continue to experience operating or net losses even after we begin generating revenue.”

ASTS data by YCharts

The first objective is obviously to install the five satellites he has ready for launch. After that, however, it has plans to manufacture and launch 20 more. That’s a task the company believes could cost as much as $400 million, at last estimate. Even that, however, will not be enough. The company’s long-term goal is to put 95 satellites into orbit. If 20 satellites cost $400 million, building 90 will push the cost to about $1.8 billion without taking into account inflationary issues that could push the price even further over time or cost efficiencies from higher volume production high which could reduce the cost per unit.

With huge costs ahead, there’s a chance investors will get a little ahead of the curve with today’s stock. Perhaps in the long run, today’s price will look reasonable (at least in hindsight), but with so much work to do, only the most aggressive investors should buy AST SpaceMobile shares today after the stock’s massive advance.

There are opportunities and risks here

AST SpaceMobile has made huge strides in business in a very short period of time. So there is reason to be positive about the future and believe that this could be a million dollar stock. However, the success of the business has translated into a massive advance in the share price, which can bring a lot of good news in too short a period of time. Young companies that spend a lot to build a business tend to be volatile, even if the stock’s overall trend is up over the long term. It wouldn’t be shocking to see a sharp pullback after such a big advance, which is why AST SpaceMobile is probably best suited for aggressive investors looking to hang in for the long haul. Or, conversely, you could just aim and wait for a recoil before pulling the trigger.