Where will AST SpaceMobile stocks be in a year?

With its stock up over 450% year to date, AST SpaceMobile (ASTS -8.22%) has caught the attention of growth-hungry investors looking for the next big thing. The Texas-based satellite maker is rapidly moving toward launching the first satellites into low Earth orbit and full commercial operations may soon follow.

Let’s explore what the next 12 months could hold have flax store for the company and its shareholders.

What is AST SpaceMobile?

Founded in 2017, AST SpaceMobile is a potentially disruptive telecommunications company that aims to build a broadband cellular network in space to bring connectivity to areas with coverage gaps. It became public through the merger with a special purpose acquisition company (SPAC) in April 2021 at a price of approximately $10 per share.

Image source: Getty Images.

Like most SPACs, SpaceMobile shares have slowly declined over the past three years as rising rates have shifted investors’ attention away from speculative growth stocks. However, in mid-2024, shares began to rise as they approached trading.

SpaceMobile has completed final assembly and environmental testing at its Texas manufacturing facility and received FCC approval to launch five of its commercial BlueBird satellites into low Earth orbit in the first half of September. The Blue Bird is designed to connect to terrestrial smartphones and extend 4G/5G cellular coverage in hard-to-reach areas.

Unlike other space-related SPACs such as Virgin Galacticwhich lost a test pilot in 2014, SpaceMobile launches involve sending hardware (not people) into space, with less at stake if things don’t go according to plan.

A very premature business

Part of the reason Companies related to SPACs have tended to underperform it is their relative immaturity compared to businesses that have come to market through traditional means initial public offerings (IPOs). SpaceMobile’s second-quarter earnings highlight this challenge.

The company’s revenue of only 900,000 dollars pale in comparison to its total operating expenses of $63.9 million, which includes considerable outflows for engineering and research services as they develop satellite platform.

With cash and equivalents of about $285 million on its balance sheet, SpaceMobile can support several quarters of its current cash burn. And that will likely be enough to get the company over the hump to commercial operation.

That said, having a commercial operation doesn’t necessarily mean profitability any time soon. And investors shouldn’t be surprised if SpaceMobile’s losses widen over the next 12 months as it faces the challenges of growing its business.

SpaceMobile will almost certainly rely on external sources of capital, such as its debt equity dilutionto remain operational. And while this will buy more time for the business to scale, it can erode current investors’ claims on future earnings and hurt the share price.

Is AST SpaceMobile stock a buy?

According to analysts from Morgan Stanleythe space industry could be worth $1 trillion by 2040, with satellite broadband accounting for about half of the opportunity. Right now, industry leaders love it SpaceX and The blue origin are privately held, making it difficult for ordinary investors to access this long-term opportunity.

SpaceMobile is helping to change this paradigm. And despite having a market cap of just $9 billion, compared to SpaceX’s estimated $210 billion, partnerships with blue chip telecommunications is a vote of confidence in its technology and strategy.

In May, Space Mobile signed an agreement with AT&T to provide wireless services from space by 2030. The company also has a similar deal with Verizon Communications, which hopes to use Space Mobile technology to target 100% coverage of the continental US for space-to-cell phone service.

Locked in with mainstream carriers, SpaceMobile can take off as soon as commercial operations begin. And the company looks poised for success in the coming year and beyond.