AST SpaceMobile(NASDAQ: ASTS) is looking to make it easy for consumers to make cellular calls and to connect to the internet from anywhere on the planet. It's doing this by building out a space-based broadband mobile network. If that sounds like a lofty goal, it is. And that's the conundrum that investors need to ponder as they consider buying, selling, or holding AST SpaceMobile shares.
Buy AST SpaceMobile
The big news around AST SpaceMobile is that it has taken the leap from simply proving it can provide a service to actually having the ability to provide that service to customers. This transition happened when the company went from having a single test satellite in orbit to now having five operational satellites floating around spaceship Earth. Those five satellites were successfully launched in September 2024.
Image source: Getty Images.
This is a big change, as the company will finally have the ability to start generating revenue instead of simply burning through cash as it develops its service. What's doubly exciting about those satellites, however, is that AST SpaceMobile isn't just launching them and praying that customers will show up. It has deals with major telecom companies like AT&T and Verizon Communications. These partners have millions of customers that can be tapped as subscribers to AST SpaceMobile's service via an add-on service to their existing cellphone bills.
That brings us to the next big part of the story -- AST SpaceMobile's service works with existing cellphones. So, unlike a service like Starlink, there's no need to buy special equipment or set anything complex up. Customers just have to say yes, and the service basically starts working. Oh, and those large corporate partners are also a source of cash to help AST SpaceMobile continue to build out its satellite network.
This brings up the problem with the company.
Sell AST SpaceMobile
The reason not to buy AST SpaceMobile is pretty simple to explain. Although it now has five satellites in orbit, the company believes it will need around 95 to have a fully operational service. Based on the company's estimates for what it will cost to get the next 20 satellites into orbit, building out the full fleet of 95 will cost another $1.8 billion That's a lot of money, particularly when you consider that AST SpaceMobile ended the second quarter with just $285 million in cash on its balance sheet.
Modest revenue opportunities, limited cash, and still-huge expenses may not be the type of story that more conservative investors want to get involved in right now. That's doubly true when you consider that the stock has increased in value by over 750% over the past year. Clearly, this is a story stock, and the story, while still speculative, has attracted a lot of investors. A huge amount of good news is already priced in here.
But what if you got in early and have benefited from that huge price increase? It wouldn't be a bad idea to lock in some profits, even if you just pull out what you originally put into the stock. That way you are playing with "house money," as the saying goes. Even if you lost every penny of the remaining investment, you would have protected yourself from a total loss.
Hold AST SpaceMobile
What about holding AST SpaceMobile if you own it? Clearly, the company is executing well on its plan to build out a space-based mobile broadband network. Selling now, as it is on the cusp of actually starting to offer a service, seems like it would be a mistake if you own the stock. Sure, if you have big gains maybe pull some money off the table, but dumping now would be like dropping out of a marathon just as you catch sight of the finish line.
It is, of course, important to keep the very real risk this investment poses in mind. AST SpaceMobile's service could fall short of expectations, it could run out of cash, it could lose its valuable partners, and it could fail to attract enough customers, among many other things that could go wrong. But if you bought the stock, you likely have a glass-half-full point of view on its prospects. It probably doesn't make sense to sell (or at least to sell all of your position) after AST SpaceMobile takes the next big step in the development of its service.
AST SpaceMobile is for investors with big dreams
If you are a conservative investor looking to get some exposure to the telecom space, a company like AT&T or Verizon will probably be more appropriate than AST SpaceMobile. If you are looking for exposure to "space" stocks, there are large defense and aerospace companies that you can consider. AST SpaceMobile and its lofty business plans are exciting, but there's still a very real risk that things won't work out as planned. And, as such, only more aggressive investors should probably be considering it.
That said, AST SpaceMobile is making very real progress toward its goals and has very substantial partners to help it along its way. If you have a positive view of the company and handle investment risk well, it seems like a reasonable stock to buy and own.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
