AST SpaceMobile (ASTS -7.13%) took investors on a wild ride after it went public by merging with a special purpose acquisition company (SPAC) on April 7, 2021. The low earth orbit (LEO) satellite developer's stock started trading at $11.63 on the first day, sank to around $2 this April, and skyrocketed to a record high of $38.60 on Aug. 19.
As of this writing, AST's stock trades at about $26 with a market cap of $4.2 billion, which is a whopping 57 times the $73.5 million in revenue it's expected to generate next year. Let's see why investors are paying such a high premium for AST's stock, if that rally is sustainable, and if it can possibly generate millionaire-making gains in the future.
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Why are investors so excited about AST SpaceMobile?
AST's LEO satellites are used to create "satellite constellations" in space, which power cellular connections for 2G, 4G, and 5G smartphones. These networks can fill the coverage gaps in terrestrial tower-based cellular networks.
AST is similar to SpaceX's Starlink, which provides space-based broadband coverage from its LEO satellites in 80 countries. However, AST supports more low-band spectrums compared to Starlink, which mainly focuses on high-band spectrums. High-band spectrums can operate a higher speeds than low-band spectrums, but they have smaller coverage areas. T-Mobile US uses a high-band spectrum, so it partnered with Starlink to expand its coverage areas two years ago. AT&T and Verizon Communications, which use low-band spectrums, signed contracts with AST earlier this year.
AST launched its first BlueWalker 3 prototype satellite in September 2022. After conducting several successful voice and data tests, it launched its first five commercial Block 1 BlueBird (BB1-BB5) satellites into orbit earlier this month. That eagerly anticipated launch marked its first major milestone toward generating consistent revenue.
But can AST SpaceMobile support its high valuations?
AST SpaceMobile didn't generate any meaningful revenue last year, and analysts only expect it to generate $6 million in revenue with a net loss of $260 million this year as it starts to commercialize its first satellites. But by 2026, they expect its revenue to rise to $393 million as it narrows its net loss to $30 million.
Based on those expectations -- which should certainly be taken with a grain of salt -- AST's stock looks a bit more reasonably valued at 11 times its 2026 sales. It also still held $285 million in cash and equivalents with a manageable debt-to-equity ratio of 1.4 at the end of the second quarter of 2024, so it won't go bankrupt anytime soon.
However, AST's future growth is dependent on rigid telecom contracts, while Polaris Market Research expects the global LEO satellite market to only expand at a compound annual growth rate (CAGR) of 13.4% from 2024 to 2032. Therefore, AST's growth could abruptly cool off as the LEO satellite market matures.
Could AST SpaceMobile generate millionaire-making gains?
If AST matches analysts' expectations for 2026 and grows its top line at a CAGR of 20% over the following eight years, it could generate $1.7 billion in revenue by 2034. If it trades at a more realistic 20 times sales, it would be worth $34 billion.
That would represent an eight-bagger gain from its current price, but it wouldn't be a millionaire maker unless you invest more than $125,000 in its speculative stock today. That's also a best-case scenario that assumes the macro environment will remain stable and AST can stay ahead of Starlink and other LEO satellite developers.
But even if AST doesn't generate millionaire-maker gains on its own, it could still have plenty of room to grow. That might be why its insiders bought nearly nine times as many shares as they sold over the past 12 months, even as its secondary offerings and high stock-based compensation expenses increased its number of outstanding shares by nearly 70%. Simply put, AST is still a good speculative space stock, but I don't think it will mint many new millionaires over the next decade.
