The hype behind AST SpaceMobile (ASTS -7.13%) has been incredible in 2024. The stock is up 300% this year, even though its nascent internet satellite network has to begin offer commercial services anywhere in the world.
But there is potential for AST SpaceMobile to be a global telecom provider, and deals with AT&T (T -0.44%) and Verizon (VZ -0.10%) show faith in the company's technology. Is it time to buy AST SpaceMobile before growth in the business takes off?
Image source: Getty Images.
AST SpaceMobile's reality
Earlier this month, SpaceX put five Block 1 BlueBird satellites into orbit to form the beginning of AST SpaceMobile's constellation. But the company has said it needs 45 to 60 satellites to provide continuous coverage, and even then, there wouldn't be a lot of capacity considering the number of people it could reach.
AST SpaceMobile said the current satellites achieved 21 Mbps download speeds with smartphones. For perspective, I am currently on a 5G home internet connection that's running at more than 100 Mbps.
Block 2 BlueBirds, which have the next-generation chipset, are expected to have 10 gigahertz of bandwidth, 10 times the capacity of current satellites but still only enough to provide high-speed access to a limited number of users.
Until there are hundreds of satellites in orbit, AST SpaceMobile's best use case will be as an emergency texting service for smartphones in remote areas.
Financial reality hits hard
At the end of the second quarter of 2024, AST SpaceMobile had $285.1 million in cash and $199.8 million in debt. And you can see below, the company's negative free cash flow at the current rate is going to burn through that cash in about a year.
ASTS Revenue (TTM) data by YCharts
AST SpaceMobile should start generating some revenue relatively soon, but the company is essentially pre-revenue today. We don't know what the return on any given satellite will be or how much demand there will be for these services.
Competition is fierce
AST SpaceMobile isn't the only one developing a satellite-to-cellphone constellation, either. SpaceX's Starlink has a constellation of 6,300 satellites today and is adding low earth orbit satellites to offer broadband service. United and T-Mobile have both announced partnerships with the company.
There are also networks being built by Eutelsat and OneWeb, Amazon, SES, and others. The skies are getting more crowded by the day, and everyone is going to be fighting for the same spectrum owners around the world.
A bright future, but caution is needed
AST SpaceMobile will likely grow quickly during the next few years as more satellites are launched and partnerships with AT&T and Verizon get off the ground. But the key for investors is turning a cash-burning business into a money-making business.
It's not clear when or if that will happen, and until we see some returns, I would take a cautious approach. New technology is great, but having great tech doesn't mean great business results will follow. And the hype for AST SpaceMobile could wear off as quickly as it kicked in this year.
