AST SpaceMobile's (ASTS 1.63%) big idea is to create a space-based cellular broadband service. It's an interesting concept, noting that Elon Musk's SpaceX has a similar service called Starlink. The good news is that if you believe in AST SpaceMobile's story, you have plenty of time to buy it. Just don't forget that there's some bad news here, as well.
There's plenty of time to buy AST SpaceMobile
From a stock price perspective, there's no reason in the world to believe that investors have missed out on AST SpaceMobile. The shares are down nearly 50% over the past year and they have fallen 85% from their all-time highs. This is not a situation in which a company's stock has rocketed higher and buying it risks buying into a Wall Street fad.
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From a business perspective, 2023 was an important year for AST SpaceMobile. In late 2022 the space-themed company launched a test satellite. In 2023 it used that satellite to prove that it could really provide the space-based cellular broadband service that it said it could. It is currently working on five satellites that it hopes to transport to a launch site in July or August 2024. Once at the site they will await a launch window to get them up into space. Once there, AST SpaceMobile may actually have, in a limited way, a service to sell.
So, from a big-picture perspective, AST SpaceMobile is only just walking up to the starting line with regard to its business. And that could be a great time to buy the stock for more aggressive investors. Conservative investors should probably stay on the sidelines, though. There are still very big hurdles to overcome before the company has a sustainable business.
Being early with AST SpaceMobile means taking on big risks
From an investor's point of view, AST SpaceMobile has a good idea, but it doesn't yet have a functioning service it can sell. Buying the stock today isn't getting in on the ground floor, it is getting in while the company is still digging out the hole in which it will pour the foundation. Simply put, you are early to this race if you buy the stock right now. A lot could still go wrong.
One critical component of AST SpaceMobile's business model is to partner with existing telecom providers, like AT&T and Vodafone, using cellphones that are already being sold in the market. The satellite service is meant to be an add-on offering, so that AST SpaceMobile will start out with a large addressable market. It can also tap its partners for capital, which it has already done. Whereas Starlink has chosen a model in which it is basically going it alone, AST SpaceMobile's approach seems to come with less risk.
And yet, AST SpaceMobile is nowhere near the point where it can offer a fully functioning service. It has one test satellite in orbit and just five on the factory floor. Even if those five were in orbit, too, the service wouldn't be fully up and running. The company's 10-K talks about a first goal of setting up a 25 satellite array and, of course, the need for more capital.
At the end of the first quarter, following a capital raise from partners in early 2024, the company had roughly $211 million in cash on its balance sheet. Given that the company is ramping up satellite production and that it had total operating expenses, pulling out depreciation, of around $168 million in 2023, it looks like AST SpaceMobile has roughly a year or so of cash before it has to start asking for more money. Financially speaking, AST SpaceMobile is walking a tightrope. If it fails to raise new capital for any reason the story here could quickly come to an end.
AST SpaceMobile: Being early means taking on extra risk
Given the moribund price of AST SpaceMobile you have not missed the opportunity to buy the stock, assuming you believe in the story behind the service it one day hopes to provide. But that's the rub; AST SpaceMobile is just a good idea right now, it doesn't actually have anything to sell. Buying it means taking on the very real risk that it fails to build out the satellite network it needs to start selling a service. Indeed, purchasing the stock now means taking on material financial and execution risks, which is probably only appropriate for aggressive investors who are also true believers.
