Shares of recent IPO space company AST SpaceMobile (ASTS 2.43%), which aims to make every mobile phone a satellite phone, jumped nearly 12% in early trading Monday before reversing course and giving back almost all of its gains in the afternoon. As of 2:15 p.m. EDT, AST stock is up just 2%.
So why the pop, and why the drop? The former is easier to explain. In fact, I can explain it in just two words: Barclays Capital.
This morning, the British megabanker initiated coverage of AST SpaceMobile stock with a buy rating and a $29 price target implying more than 120% upside in the now $13 stock. If that promise weren't enough to catch investors' attention, I don't know what would be!
AST, argued Barclays, offers a "unique ... proposition" to customers, specifically, the potential to "extend mobile coverage everywhere via satellite," StreetInsider.com reports today.
That being said, Barclays also admits that "the investment case does come with elevated risks." This is the fact that may explain why the stock wasn't able to hold onto all of its gains today. And specifically, the risks here are the ones I pointed out back in January: the fact that the company has no operating satellites in orbit yet, and won't tell anyone how its "highly proprietary" technology works!
Granted, as Barclays argues, "if the technology works as planned and management executes, we see a compelling investment opportunity." But until the company does execute on its plan, and proves that the technology works, an investment in AST SpaceMobile has to remain classed under the category "speculative."
Don't invest more than you can afford to lose.