SpaceX is one of the best-known companies in the world. It is privately valued at an estimated $400 billion, with a lot of that market value coming from its fast growing satellite internet service called Starlink that has a reported 6 million customers and is growing rapidly. But what if there was a company about to disrupt Starlink's entire business model?
Enter AST SpaceMobile (ASTS 7.06%). This satellite internet upstart has innovated to eliminate the need for clunky terminals to connect devices to the internet directly from satellites. Its shares are up around 100% already this year, with its service set to become operational within the next few quarters.
Let's dive into the numbers and see what potential AST SpaceMobile stock has for investors going forward.
No terminal, no problem
Satellite internet services like Starlink are great, but they come with one big drawback: clunky terminals. The standard dish is not ginormous, but is not something you could take out on a hike. AST SpaceMobile plans to get rid of the terminals altogether with its constellation of ultra-large satellites that can beam high speed internet directly to smartphones.
This would be a stepchange in customer value for satellite internet, and could lead to two outcomes. One is more people willing to pay for satellite internet, and two is existing customers of Starlink and equivalent services switching to AST SpaceMobile with its direct-to-device technology.
As it launches more of its satellites, AST SpaceMobile expects to turn on its service in the United States and then grow to Canada, the United Kingdom, and Japan throughout 2026. It will take steady launches of these large satellites, but eventually AST SpaceMobile has a path to true global coverage with direct-to-device internet.
Image source: Getty Images.
A huge global opportunity
Direct-to-device satellite internet could be a game changer for tens of millions of customers. The market opportunity includes geographically remote workers, hikers, fire service workers, people who work on commercial boats, and cruise ship passengers. It does not need to replace existing telecommunications infrastructure (at least, not today), but can be the perfect add-on to fill in the gaps in service.
This is why AST SpaceMobile has partnered with numerous telecommunications companies around the globe like Verizon Communications, giving it access to 3 billion potential customers. AST SpaceMobile will sell this service as an additional plan through the existing wireless contract relationships, and then sharing revenue earned with these telecommunication partners.
Revenue generation potential is immense once the AST SpaceMobile constellation goes global. For every 1 million customers who sign up at an estimated $10 a month, that is $120 million in revenue potential. If just 3% of the global addressable market signs up for AST SpaceMobile's satellite internet service at any one time, that is 90 million customers and potentially $10 billion in revenue. The company also has contracts that it will deploy with the U.S. military, which should lead to even more sales growth.
Can AST SpaceMobile keep soaring?
Having 90 million customers is a greenfield scenario for AST SpaceMobile, and is not going to happen anytime soon. It will take years to build up the constellation to full capacity, as well as for telecommunications partners to market the add-on service to their customers. But the potential is there for AST SpaceMobile to disrupt a fast growing and lucrative sector in satellite internet, if it can execute on its growth plans.
At a market capitalization of $16 billion today, AST SpaceMobile looks cheap relative to the estimates laid out above. However, investors need to remember that this is a company generating zero revenue at the current moment and burning a boatload of cash each year. A lot can go wrong with its launch partners, like the recent delay from the India Space Agency that may keep some of its satellites from launching later this year. Even if things go all according to plan, it may be a decade before AST SpaceMobile starts posting a profit and gets to revenue and earnings figures that would make the current market capitalization reasonable.
If you have faith that AST SpaceMobile can hit $10 billion in revenue and fully disrupt the satellite internet market, then the stock will likely keep doing well for investors who buy today. Just remember there are always downsides when investing in highly risky companies like AST SpaceMobile.
