We came across a bullish thesis on AST SpaceMobile, Inc. (ASTS) on Substack by Steve Wagner. In this article, we will summarize the bulls’ thesis on ASTS. AST SpaceMobile, Inc. (ASTS)’s share was trading at $23.29 as of Nov 27th.
A close up of a satellite in space, showing the advanced technology of communications systems.
AST SpaceMobile (ASTS) reported a wider-than-expected net loss of $1.10 per share for Q3 2024, significantly exceeding analysts’ projections. Despite this, the company’s revenue reached $1.1 million, slightly above the anticipated $1 million, reflecting work completed under a U.S. government contract. Operating expenses for the quarter totaled $66.6 million, with $45.3 million in adjusted operating expenses driven by increased investment in research and development (R&D). The company ended the quarter with a solid cash position of $518 million but continues to face significant capital needs as it pursues its ambitious goals.
CEO Abel Avellan emphasized the company’s operational milestones during the quarter, including the successful launch and operational integration of its first five BlueBird satellites. These satellites are in beta testing, working with major telecom partners like AT&T and Verizon, with ASTS seeking regulatory approval to begin beta services. The company also secured orbital launch capacity for continuous space-based cellular broadband service in key markets, including the U.S., Europe, and Japan, through partnerships with Blue Origin and other providers for launches in 2025 and 2026. Additionally, ASTS achieved initial validation of its AST5000 ASIC chip, which will support data transmission speeds up to 120 Mbps, facilitating direct-to-smartphone services for voice, data, and video.
Despite these advancements, ASTS faces significant financial challenges. The cost of building and launching satellites is high, with estimates placing the price tag for deploying 60 BlueBird satellites at up to $1 billion. While the company holds over $518 million in cash reserves, there remains a funding gap. ASTS is exploring non-dilutive financing options such as commercial prepayments, government loans, and potential partnerships. The company has already raised $153.3 million through a warrant redemption and an at-the-market (ATM) program, using some funds to reduce debt and lower future interest expenses. However, concerns about potential dilution remain, as ASTS has historically relied on equity offerings to raise capital, and the stock’s recent decline may reflect market worries about liquidity and the timeline to full commercialization.
Looking ahead, ASTS’s prospects are tied to the successful deployment of its satellites and the execution of its business plan. The company’s plans to launch 25 additional satellites in 2025, to deploy 95 satellites to cover key markets, will require substantial capital and operational efforts. Although the company has raised some funding through non-dilutive means, further capital raises may be necessary, potentially leading to shareholder dilution. In the meantime, ASTS is working to secure prepayments for services from mobile network operators, which could provide immediate funding without issuing additional equity.
Despite these risks, ASTS remains optimistic about its competitive position. While the company faces competition from initiatives like SpaceX’s Starlink, ASTS holds over 1,000 patents for its direct-to-cell communication technology, which could give it an edge in the market. However, concerns about competition from Musk’s ventures persist, as his companies’ resources and political connections could provide advantages in securing regulatory approvals and capital.
In conclusion, while ASTS’s wider-than-expected loss and ongoing funding challenges are notable, its technological progress and strategic partnerships position it well for future success. The next few years will be critical as the company moves toward full commercialization and seeks to secure the capital necessary for its expansion. Investors should remain cautious but recognize that ASTS’s space-based connectivity technology has the potential to disrupt the telecommunications industry, making it an intriguing, albeit speculative, investment.
AST SpaceMobile, Inc. (ASTS) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 18 hedge fund portfolios held ASTS at the end of the third quarter which was 15 in the previous quarter. While we acknowledge the risk and potential of ASTS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ASTS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.