Satellite communications company EchoStar (SATS 19.75%) announced on Monday morning that it will sell two blocks of 5G spectrum to SpaceX for use by its Starlink internet and "direct to cell" mobile communications service.
This is great news for SpaceX and great news for EchoStar. At last report, EchoStar stock was up nearly 18% on the news. One bunch of investors that's less thrilled with the development, though, are those who have been investing in Starlink rival AST SpaceMobile (ASTS -3.87%).
As of 10:20 a.m. ET, AST SpaceMobile stock was down 5.7%.
Image source: Getty Images.
SpaceX versus AST SpaceMobile
As Roth Capital explained Monday in a note covered on TheFly.com, EchoStar's "fire sale" will help Starlink bulk up on spectrum it can use to provide commercial services on the cheap. This puts "pressure" on AST SpaceMobile shares, based on the theory that what's good for SpaceX is necessarily bad for its competitor.
Roth doesn't share this view -- and he remains optimistic about AST SpaceMobile, putting a buy rating and a $56 price target on the stock, which currently trades at around $40.
As the analyst explains, SpaceX now "will require next-generation satellites and a smartphone refresh" among subscribers to partner T-Mobile (TMUS -3.90%). Meanwhile, AST retains strong alliances with cellphone providers including AT&T (T -2.31%) and Verizon (VZ -2.39%).
Is AST SpaceMobile stock a buy?
I'm not so sure Roth is right about that. SpaceX's strategy already involves steadily replacing old Starlink satellites with upgraded ones, so I doubt that's really a concern. As for AST SpaceMobile, the company has a market cap of $14 billion, yet it lacks both profits and any appreciable revenue. (Total revenue for the past year was less than $5 million, according to S&P Global Market Intelligence data.)
It seems to me that SpaceX is winning this race. AST looks stuck in neutral.
