AST SpaceMobile’s (ASTS) first-quarter earnings call shows that the company is progressing quickly on multiple fronts and remains well-positioned to disrupt the cellular broadband market.
I continue to believe that the company will have a very bright future, and I still view ASTS as one of the best midsize defense stocks to buy.
Background on ASTS And Its Technology
AST has developed the world’s only technology that allows satellites to provide connectivity services to unmodified smartphones. The firm has demonstrated that its technology enables unmodified smartphones to make 5G space-based voice and video calls and to download data using satellite internet access.
In March, AST signed a new, momentous deal with longtime partner, UK-based Vodafone (VOD). Under the agreement, the firms will ” create a jointly-owned European satellite service business …to serve mobile network operators…in all European markets.” The business “will seek to provide 100% geographic coverage in every part of Europe to give consumers and businesses access to secure space-based cellular broadband connectivity.” VOD has invested $25 million in ASTS on its own and, in conjunction with AT&T (T) and Google (GOOG), provided a $110 million loan to the firm.
And in the U.S., Verizon (VZ) has invested $100 million in ASTS in an effort to use the latter firm’s technology ” to target 100% coverage of the continental US.” VZ has also agreed to purchase $25 million of ASTS’ products.
Finally, AST in February signed a $43 million deal with the United States Space Development Agency.
AST’s Recent Progress and medium-term goals
The company recently obtained authorization from the FCC to utilize the FirstNet Direct network. Used by first responders nationwide, FirstNet could give ASTS the opportunity to provide its technology to millions of American public-safety officials.
Additionally, the firm intends to deploy five satellites in “the next six to nine months..with..launches occurring every one to two months during 2025 and 2026,” its CEO, Abel Avellan, reported during the earnings call.
By launching these satellites, AST will clear the path to providing commercial service, Avellan stated, adding that creating a satellite network ” is critical to delivering on the global opportunity of providing space based server connectivity to the modified phone in your pocket today.”
The company expects that its ASIC chip, which Avellan called “a key enabler of the first and only space based broadband cellular system,” will be ready for use “as early as” this June. The chip processes data 10 times as quickly as its current semiconductors and “supports many thousands of cells per satellite,” he said.
Finally, the company’s “longtime partner, Rakueten Mobile” completed a two way broadband video call in front of a live audience enabled by satellites… over Japan. The call was conducted using (unmodified) smartphones,” the CEO noted. He suggested that the technology would be especially useful in Japan, given its “diverse geography” and the fact that it’s ” prone to national disasters.”
Assessing the Potential Long-Term Future of ASTS
AST’s technology provides today’s unmodified smartphones with the ability to be fully functional in every location on Earth. Of course, this technology will be tremendously useful to many if not most first responders and militaries on the planet, in light of their need to often communicate in remote locations.
But smartphones equipped with the technology could also be successfully marketed to many consumers, including hikers, boating enthusiasts, and those who frequently go on camping trips or take cruises. And such smartphones could also be marketed to all consumers as potentially life-saving in the event of car accidents or any emergency that disrupts conventional smartphone service.
Since many people enjoy recreational activities in remote locations and/or worry about their ability to communicate with the outside world during emergencies, I believe that a very large percentage of consumers in developed countries would pay a significant premium to ensure that they can always receive cellular service.
In light of all of the points in this section, I believe that AST will be able to charge the major mobile network operators in developed countries at least $50 to $100 per smartphone sold to consumers with its technology and that many millions of such devices will be sold annually. If 15 million devices are sold annually to consumers with its technology and AST receives $75 per devices, that equates to $1.125 billion of annual revenue. Assuming that the company can obtain double that amount from governments (I believe the estimate is justified, given governments’ willingness to pay huge premiums for goods and services) its total revenue would come in at $3.375 billion.
If the stock trades at five times the company’s revenue, which is a realistic price-sales multiple for a very rapidly growing firm with “hot” technology, its market capitalization would be $16,875 billion. That’s nearly double the company’s current market capitalization of $8.75 billion.
Consequently, I believe that the stock could easily double within the next five years, making it quite suitable for long-term growth investors.
*This article is intended to be informational only; it is not financial advice.
