What happened
Wednesday is turning into a mixed day for investors in the space industry, as shares of recent highfliers Virgin Galactic Holdings (SPCE 5.16%) and BlackSky Technology (BKSY +4.11%) -- up 74% and 31%, respectively, since the start of the month -- turn south and give back some of their gains. As of 11:30 a.m. ET, Virgin Galactic shares are down 7.2% today, and BlackSky is 5.6% in the red.
On a brighter note, cell-phones-from-space company AST SpaceMobile (ASTS 8.54%) has some good news today, which is lifting its shares a healthy 2.8%.
NASDAQ: ASTS
Key Data Points
So what
Why are Virgin Galactic and BlackSky stocks down today? The answer is probably as simple as "profit-taking." As noted above, both stocks have enjoyed incredible gains in the first half of June, as space investors bet on:
- a successful beginning to Virgin Galactic's space tourism business, the first revenue-generating flight of which is scheduled to take place next week; and
- rewarding BlackSky for inking a valuable military contract that appears likely to grow the company's revenue base by as much as 14%.
The news is good in both instances, granted. But as I pointed out yesterday, it still leaves Virgin Galactic in a position in which it's likely to continue losing in excess of $100 million a quarter. And it doesn't change the fact that BlackSky isn't expected to turn a profit before 2025 (according to analysts polled by S&P Global Market Intelligence). Given these caveats, it makes sense that investors might be rethinking their enthusiasm for these two space stocks today.
Now what
But what about AST SpaceMobile stock -- today's only real winner in the "new space" space? Well, if you recall, two months ago, AST announced its first-in-history ordinary cell phone call placed from one continent to another using nothing but a satellite for the connection.
Today, AST announced that in a follow-up to that April proof of concept, it has "achieved repeated successful download speeds above 10 Mbps during testing" of that same BlueWalker 3 satellite used to place that phone call. Once again, the tests involved "off-the-shelf smartphones" -- i.e., not specialized satellite phones -- that achieved 4G-like speeds using only space-based infrastructure. Next, AST says it hopes to demonstrate that it can achieve 5G speeds via space.
All that being said, AST SpaceMobile stock still faces the same headwinds that took down Virgin Galactic and BlackSky stocks today. To wit, while its technology apparently works, it's not yet proven that AST can provide this service at commercial scale and earn a profit in the process. Revenues are still basically nil, and for AST to earn a profit, analysts estimate the company will need to pass $500 million in annual sales -- something that's not likely to happen before 2025 at the earliest.
All of which is to say, if you own AST stock...enjoy the fact that today, it's one of the few space-stock winners. But expect more bumps in the road and sell-offs in the stock between now and the date the company (hopefully) earns its first profit.
