Should You Buy AST SpaceMobile While It’s Under $25?

the hype behind it AST SpaceMobile (ASTS 6.25%) was incredible in 2024. Shares are up 300% this year, even though its nascent satellite Internet network has yet to begin offering commercial service anywhere in the world.

But there is potential for AST SpaceMobile to be a global telecommunications provider, and it is dealing with AT&T (NYSE: T) and Verizon (NYSE: VZ) show confidence in the company’s technology. Is it time to buy AST SpaceMobile before you start growing your business?

Image source: Getty Images.

AST SpaceMobile reality

Earlier this month, SpaceX put five Block 1 BlueBird satellites into orbit to form the beginning of the AST SpaceMobile constellation. But the company said it needs 45 to 60 satellites to provide continuous coverage, and even then there wouldn’t be much capacity given the number of people it could reach.

AST SpaceMobile said current satellites have achieved download speeds of 21 Mbps with smartphones. For perspective, I’m currently on a 5G home internet connection running at more than 100Mbps.

Block 2 BlueBirds, which have the next-generation chipset, are expected to have a bandwidth of 10 gigahertz, 10 times the capacity of current satellites, but enough to provide high-speed access to a limited number of users.

Until there are hundreds of satellites in orbit, AST SpaceMobile’s best use case will be as an emergency texting service for smartphones in remote areas.

Financial reality hits hard

At the end of the second quarter of 2024, AST SpaceMobile had $285.1 million in cash and $199.8 million in debt. And you can see below, the company’s negative free cash flow at the current rate will burn through that cash in about a year.

ASTS Revenue (TTM) data by YCharts

AST SpaceMobile should start generating revenue relatively soon, but the company is essentially pre-revenue today. We do not know what the profitability of a particular satellite will be or how much demand there will be for these services.

The competition is fierce

Nor is AST SpaceMobile the only enterprise developing a satellite-to-mobile phone constellation. SpaceX’s Starlink has a constellation of 6,300 satellites today and is adding satellites in low Earth orbit to provide broadband services. United and T-Mobile both announced partnerships with the company.

There are also networks built by Eutelsat and OneWeb, AmazonSES and others. The sky is getting more and more crowded by the day and everyone will be fighting for the same spectrum owners around the world.

A bright future, but caution is needed

AST SpaceMobile will likely grow rapidly over the next few years as more satellites are launched and partnerships with AT&T and Verizon take off. But the key for investors is turning a cash-burning business into a money-making business.

It’s unclear when or if that will happen, and until we see some returns, I’d take a cautious approach. New technology is great, but having great technology doesn’t mean great business results will follow. And the hype for the AST SpaceMobile could fizzle out as quickly as it started this year.