Many investors love to speculate. After all, finding the next big thing can bring monster returns. But with that potential comes an equal amount of risk. Investors who took that risk on AST SpaceMobile (ASTS 3.87%) stock a year ago have been handsomely rewarded.
AST stock at one point during the past year soared by almost 600%. Some of that undoubtedly was just from speculators hoping shares would rise as the company's first commercial satellite launch approached. Now that it has successfully deployed its first five broadband satellites, it's a good time to look at whether AST SpaceMobile shares are still a good buy.
Votes of confidence
In some ways, speculative investing is a form of betting. It shouldn't be the foundation of any portfolio. But getting in ahead of the crowd can juice the returns of a diversified portfolio in a meaningful way. Early buyers of successful companies like Nvidia and Tesla were really just speculating about the direction computing, artificial intelligence (AI), and electric vehicles (EVs) would go before those technologies had proven themselves. Consider how many investors had even heard the term "generative AI" as recently as just last year, let alone had a plan to profit from it.
AST SpaceMobile has its own plan to rethink how modern technology is used. It plans to create the first space-based broadband cellular network of satellites that will let smartphone users access the internet globally. The SpaceMobile network is designed to connect to the internet everywhere on earth, including on land, at sea, or in the air.
That could not only offer internet access to billions who are underserved, it could also disrupt existing cellular broadband providers. American Tower is one important player in the existing system, with its land-based cellular towers.
Yet American Tower was an early investor in AST, and its chief technology officer (CTO), Ed Knapp, sits on AST's board. American Tower invested in AST nearly five years ago, and it is also a technology partner and customer of the company. Those are strong votes of confidence from within the industry, as are agreements and planned partnerships from more than 40 mobile network operators with more than 2 billion subscribers.
AST SpaceMobile successfully launched its first five commercial satellites in September. Image source: Getty Images.
Transforming connectivity around the globe
Any early stage company with transformative technology is going to be difficult for investors to value. Speculators and traders may drive up shares to unsustainable valuations before taking quick profits. In the case of AST SpaceMobile, hype leading up to its first commercial satellite launch earlier this month drove the company's market cap to almost $6 billion in August.
But the shares have dropped more than 30% since AST's mid-August peak. The recent market cap of about $4 billion may be a more reasonable level for investors. Telecom giants AT&T and Vodafone have both committed funds to AST and placed purchase orders for network equipment from the company for planned commercial service.
The case for buying AST SpaceMobile
The market opportunity is huge. AST wants to improve global internet access because most of the earth's surface doesn't have cellular coverage, and more than 40% of the earth's population lacks cellular broadband. That creates what the company believes is an untapped market valued at more than $1 trillion.
A $4 billion valuation may seem high for a company without any real revenue, and one that still needs to spend a lot to fill out its satellite network. But adding AST SpaceMobile as an aggressive, speculative part of a portfolio may make sense for investors who allocate the right amount and can stomach a volatile stock price along the way.
