Where Will AST SpaceMobile Stock Be in 3 Years?

AST SpaceMobile (NASDAQ: ASTS), a producer of low earth orbit (LEO) satellites for cellular communications, went public by merging with a special purpose acquisition company (SPAC) on April 7, 2021. Its stock started trading at $11.63, but it sank to about $2 this April after it postponed the launch of its first commercial satellites.

But today, AST SpaceMobile trades at about $25. Most of that rally was driven by the successful launch of its first five Block 1 BlueBird commercial satellites on Sept. 12. So could this hot stock soar even higher over the next three years?

Image source: Getty Images.

AST SpaceMobile aspires to be the next Starlink

AST's LEO satellites are used to provide cellular connections for 2G, 4G, and 5G devices in "dead zones" that can't be reached by terrestrial tower networks. It mainly supports low-band spectrums, which operate at lower speeds but have broader coverage areas than high-band spectrums. Its rival Starlink initially focused on high-band spectrums.

T-Mobile, which provides its 5G services through high-band spectrums, partnered with Starlink to expand its coverage areas in 2022. AT&T and Verizon, which both provide low-band 5G connections, partnered with AST SpaceMobile earlier this year to keep up with T-Mobile.

AT&T and Verizon's support suggests AST has a bright future as a potential challenger to Starlink, which established a first mover's advantage in the niche market by expanding its satellite-based cellular services across 80 countries. AST should also finally start generating revenues from its first batch of commercial satellites.

What happened to AST SpaceMobile over the past three years?

AST generated $12.4 million in revenue in 2021 and $13.8 million in revenue in 2022, but it didn't generate any revenue in 2023. Most of its revenue in 2021 and 2022 came from NanoAvionika, its former Lithuanian subsidiary which developed small satellite technologies and other ancillary services before it was sold off in September 2022.

On its own, AST's SpaceMobile Service didn't generate any revenue in 2023, but it racked up a net loss of $87.6 million. It only conducted a few voice and data transfer tests after it launched its first prototype BlueWalker 3 satellite in September 2022.

In the first half of 2024, AST generated just $1.4 million in revenue (from performance obligations completed under an agreement with a prime contractor of the U.S. government) with a net loss of $92.3 million. For the full year, analysts expect it to generate just $6.4 million in revenue with a staggering net loss of $259.7 million.

That's a lot of red ink for a company that ended the second quarter with $285.1 million in cash and equivalents, $337.8 million in liabilities, and an elevated debt-to-equity ratio of 1.4. It's also nearly tripled its number of shares since its public debut with its stock-based compensation and secondary offerings, and it still looks expensive at 624 times this year's sales.

What could happen to AST SpaceMobile over the next three years?

AST SpaceMobile's fundamentals look shaky, but the bulls believe it can successfully scale up its fledging business. The company plans to launch its first Block 2 BlueBird satellites, which are about 3.5 times larger than its Block 1 satellites and provide roughly 10 times the data processing capacity, in the first quarter of 2025.

AST SpaceMobile plans to eventually launch 17 Block 2 satellites, and the next launch should ferry at least four of them into orbit. Over the long term, it plans to operate 243 LEO satellites -- but that ambitious expansion still requires broader approval from the Federal Communications Commission (FCC).

To grow its near-term revenue, AST will focus on collecting more prepayments from its cellular partners. It will also try to get more financing from state-backed export credit agencies instead of diluting its shares to cover its future capital requirements.

Based on those optimistic expectations, analysts think AST SpaceMobile's annual revenue will soar to $393 million in 2026 as it narrows its net loss to $30 million. However, a lot of that growth potential is already baked into its forward valuations. With an enterprise value of $4 billion, AST already trades at 10 times its estimated 2026 sales.

AST SpaceMobile is still a speculative space stock with a lot of upside potential

Despite those challenges, AST SpaceMobile could still have plenty of room to grow. For reference, Starlink could generate $6.6 billion in revenue this year, according to Quilty Space, from its constellation of nearly 6,000 satellites. If it only grows to a fraction of that size over the next three years, its stock could maintain its premium valuations and climb even higher.

But AST could also struggle to keep up with Starlink, face more delayed launches, and fail to raise enough cash to cover its soaring expenses. So over the next three years, its stock could easily sink back to the single digits instead of generating multibagger gains. I'm cautiously optimistic about AST's future, but I'd only nibble on its volatile stock as it gradually scales up its business, and I would avoid accumulating large amounts of shares at its current valuations.

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Leo Sun has positions in AT&T. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.